Question

Which one of the assertions about statement 1 and statement 2 is most likely to be true? Statement 1: When a company performs very well, the dividends paid to its preferred shareholders are frequently raised. Statement 2: When a company performs very well, the dividends paid to its common shareholders are frequently raised.

Answer 1

Answer: B. Statement 1 is false and statement 2 is true

Explanation:

Preference Shareholders do not see their dividends raised when a company is going through good times. This is because they usually earn a FIXED dividend.

Ordinary/Common Shareholders though, will usually see their dividends rise when a company performs well so that they may enjoy the profits.

If you need any clarification do comment.