Dividends are a(n) a. expense b. distribution to owners c. asset d. increase in equity


Dividends are a(n)

a. expense

b. distribution to owners

c. asset

d. increase in equity

How Dividends Are Disbursed:

A company will retain most of its profits in the form of retained earnings. These earnings are used to reinvest in the company in order to support future business operations. However, a company may also choose to use a portion of its profit to pay a dividend to its shareholders. A dividend must be voted upon and approved by a board of directors. The date that a dividend is announced is known as the Announcement Date. The Announcement Date will identify an Ex-Dividend Date, which is the date before which an investor must hold equity in the company in order to qualify for a dividend payment. Investors who purchase stocks on or after the ex-dividend date will not receive a dividend payment even though they will be holding the stock when the dividend payment is made. The Record Date is the date by which a company must determine which shareholders will receive dividends. The Payment Date is the settlement date on which the dividend is disbursed.

Answer and Explanation:

Dividends are a(n)

b. Distribution to owners


Dividends are monetary distributions that are made by a company to stockholders. Dividends are paid out of profits and are received by the stockholders at a given rate per share. Dividends tend to be paid in the form of a cash dividend or a stock dividend. If a stockholder owns 10,000 shares in a company that issues a $0.20 per share cash dividend, the stockholder will receive $2,000 of dividend payments.

Learn more about this topic:

Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1

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