Question

Dividend payments are defined as: a. incremental increases in the value of the stock held by an investor due to rises in share price b. part share of the profits or earnings of a company paid to each shareholder on the basis of the number of shares c. they hold payments made to a company by investors for a share of the ownership of that company d. the difference between the original cost price of a share and the price an investor receives when that share is sold

Answer 1

Answer:

The correct option is B, the part share of the profits or earnings of a company paid to each shareholder on the basis of the number of shares

Explanation:

The shareholders are paid dividends from the distributable profits of the company and distributable profits imply profits recorded after other providers of finance such as preferred shareholders and bond-holders have been paid dividends and interest on bonds respectively.

The dividends paid can be in cash or in shares.Paying dividends in cash is known cash dividends while paying in shares is called stock dividend.

It is imperative to pay dividends in form of shares if there are viable investment projects the company intends to invest with the cash that have otherwise be paid out as dividends.