Is it possible to have a negative dollar amount of dividends received for owning stock during the year?
Dividends are distributions of earnings made by companies to their shareholders. Dividends may be in the form of cash or other capital such as additional dividends. A liability is created on the day that dividends are declared. When dividends are paid, the liability is removed and the appropriate capital account is credited.
Answer and Explanation:
When investors purchase stock, they hope to earn returns through capital appreciation and/or dividends. It is important to note that stockholders are not responsible for any additional payments to the business after purchasing stock. In other words, a stockholder will never be required to pay more into the company than the price paid to purchase stock. Thus, since a stockholder cannot be in debt to the company for dividends, dividends received can only be positive.
Financial Disclaimer: The information on this site is for academic purposes only and is not a substitute for professional financial advice.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Finance 101: Principles of FinanceChapter 16 / Lesson 1