Multiple Choice
Given the statements below, choose the most accurate definition of dividends.
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12. Stockholders' Equity
Dividends and Dividend Preferences
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A distribution of assets to shareholders is referred to as a(n):
A
Retained earning
B
Stock split
C
Treasury stock
D
Dividend
Verified step by step guidance1
Understand the concept of a dividend: A dividend is a distribution of a company's earnings or assets to its shareholders, typically in the form of cash or additional shares. It represents a return on investment for shareholders.
Differentiate between the given options: Retained earnings are profits that a company keeps for reinvestment rather than distributing to shareholders. A stock split involves dividing existing shares into multiple shares to increase liquidity, and treasury stock refers to shares that a company has repurchased and holds in its treasury.
Recognize that dividends are specifically tied to the distribution of assets or earnings to shareholders, making it distinct from the other options provided.
Review the context of the problem: The question explicitly asks for the term that refers to the distribution of assets to shareholders, which aligns with the definition of a dividend.
Conclude that the correct answer is 'Dividend' based on the explanation and elimination of other options.
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