Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is a reason why a corporation may choose not to pay dividends?

Because paying dividends reduces the company's stock price permanently

To increase the number of outstanding shares

To retain earnings for future growth and expansion

Because dividends are required by law to be paid annually

Previous problemNext problem

Verified step by step guidance

Understand the concept of dividends: Dividends are payments made by a corporation to its shareholders, typically derived from profits. They are not mandatory and depend on the company's financial strategy and goals.

Analyze the reasons why a corporation might choose not to pay dividends: Corporations may retain earnings to reinvest in the business for future growth, expansion, or other strategic purposes.

Evaluate the incorrect options: Paying dividends does not permanently reduce the stock price; stock price fluctuations depend on market factors. Dividends do not increase the number of outstanding shares, as this is typically achieved through stock splits or issuing new shares. Dividends are not legally required to be paid annually.

Focus on the correct reasoning: Retaining earnings allows the corporation to fund projects, acquisitions, or other investments without relying on external financing, which can be beneficial for long-term growth.

Conclude that the correct answer is: 'To retain earnings for future growth and expansion,' as this aligns with the strategic financial management of a corporation.