What are dividends?
a) A form of debt issued by a company
b) The interest earned on a savings account
c) The distribution of profits by a company to its shareholders
d) The price at which a stock is bought or sold
Answer: c) The distribution of profits by a company to its shareholders
Dividends are typically paid out in which form?
a) Cash
b) Stocks
c) Bonds
d) Options
Answer: a) Cash
Which of the following is true about dividends?
a) Dividends are guaranteed payments to shareholders.
b) Dividends are always paid annually.
c) Dividends are tax-free for shareholders.
d) Dividends are determined and declared by the company’s board of directors.
Answer: d) Dividends are determined and declared by the company’s board of directors.
The dividend yield is calculated as:
a) Dividend per share divided by the stock price
b) Stock price divided by the dividend per share
c) Earnings per share divided by the dividend per share
d) Dividend per share divided by the company’s total assets
Answer: a) Dividend per share divided by the stock price
Which of the following factors may influence a company’s decision to pay dividends?
a) Profitability
b) Cash flow
c) Financial obligations
d) All of the above
Answer: d) All of the above
What is a dividend reinvestment plan (DRIP)?
a) A plan that allows shareholders to receive dividends in a different currency
b) A plan that allows shareholders to reinvest their dividends to purchase additional shares
c) A plan that allows shareholders to defer the payment of dividends to a later date
d) A plan that allows shareholders to transfer their dividends to a different company
Answer: b) A plan that allows shareholders to reinvest their dividends to purchase additional shares
Which of the following is an advantage of receiving dividends?
a) Potential for capital appreciation
b) Tax advantages
c) Diversification of investment portfolio
d) Regular income for shareholders
Answer: d) Regular income for shareholders
True or False: Dividends are guaranteed and cannot be reduced or eliminated by a company.
Answer: False. Dividends are not guaranteed and can be reduced or eliminated by a company depending on its financial performance and other factors.
What is a dividend payout ratio?
a) The ratio of the company’s dividend per share to its earnings per share
b) The ratio of the company’s dividend per share to its stock price
c) The ratio of the company’s dividend per share to its total assets
d) The ratio of the company’s dividend per share to its market capitalization
Answer: a) The ratio of the company’s dividend per share to its earnings per share
Which type of company is more likely to pay dividends?
a) Start-ups and high-growth companies
b) Established and mature companies
c) Non-profit organizations
d) Government-owned enterprises
Answer: b) Established and mature companies
What is a dividend yield?
a) The ratio of the company’s earnings per share to its dividend per share
b) The ratio of the company’s dividend per share to its stock price
c) The ratio of the company’s dividend per share to its total assets
d) The ratio of the company’s dividend per share to its market capitalization
Answer: b) The ratio of the company’s dividend per share to its stock price
Which of the following statements about dividend dates is correct?
a) The ex-dividend date is the date on which the dividend is paid to shareholders.
b) The record date is the date on which shareholders must own the stock to be eligible for the dividend.
c) The payment date is the date on which the dividend is declared by the company.
d) The announcement date is the date on which the dividend is set by the company’s board of directors.
Answer: b) The record date is the date on which shareholders must own the stock to be eligible for the dividend.
True or False: Dividends received by shareholders are always taxable.
Answer: True. In most cases, dividends received by shareholders are taxable as income.
Which of the following is a disadvantage of paying dividends?
a) Reduced cash reserves for the company
b) Increased shareholder loyalty and satisfaction
c) Enhanced company reputation in the market
d) Improved access to capital for future investments
Answer: a) Reduced cash reserves for the company
What is a dividend aristocrat?
a) A company that consistently pays a high dividend yield
b) A company that has increased its dividend for at least 25 consecutive years
c) A company that pays dividends in multiple currencies
d) A company that offers a dividend reinvestment plan (DRIP)
Answer: b) A company that has increased its dividend for at least 25 consecutive years
Which of the following factors may cause a company to reduce or eliminate its dividends?
a) Economic downturns
b) Cash flow constraints
c) Increased capital expenditure requirements
d) All of the above
Answer: d) All of the above
What is a special dividend?
a) A dividend paid to shareholders as a result of extraordinary company performance
b) A dividend paid in addition to the regular quarterly or annual dividends
c) A dividend paid to a specific group of shareholders
d) A dividend paid in the form of company stocks instead of cash
Answer: b) A dividend paid in addition to the regular quarterly or annual dividends
True or False: Preferred shareholders are generally entitled to receive dividends before common shareholders.
Answer: True. Preferred shareholders usually have priority in receiving dividends over common shareholders.
What is a stock dividend?
a) A dividend paid in the form of additional shares of the company’s stock
b) A dividend paid in cash to shareholders
c) A dividend paid to preferred shareholders only
d) A dividend paid to employees of the company
Answer: a) A dividend paid in the form of additional shares of the company’s stock
Which financial statement would typically include information about dividends?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
Answer: d) Statement of retained earnings