Question

What are dividend payments?

A) payments made to a company by investors for a share of the ownership of that company.
B) incremental increases in the value of the stock held by an investor due to rises in share price.
C) the difference between the original cost price of a share and the price an investor receives when that share is sold.
D) a share of the profits paid to each shareholder on the basis of the number of shares they hold.

Answer 1

D) a share of the profits paid to each shareholder on the basis of the number of shares they hold.

Step-by-step explanation:

Dividend: The dividend is distributed when the company is earning profits. If the company is suffering losses, then no dividend is declared. In this, the priority is given to the preference shareholders then equity shareholders.

After distributing the dividend to the shareholders, the balance would be transferred to the retained earnings which is come under shareholder equity in the balance sheet.

So, based on their holding shares, the dividend is paid to each shareholder.