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

Question:

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

Explanation:

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:

Loading...
Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
5.1K

Related to this Question

Explore our homework questions and answers library