
A dividend is . . .?
Select ONE answer:
- a share of a company‘s profit.
- interest paid on a company‘s borrowings.
- always paid to banks and other creditors.
- None of the above.
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 1
- Correct – Dividends are paid by companies to their shareholders (both owners of ordinary shares and owners of preference shares, where applicable) as a return on the investment they have made in the company.
- Not correct – Interest paid by a company on its borrowings is an expense which is deducted when calculating profit whereas dividends are an appropriation of the profit earned by a company.
- Not correct – Dividends may be paid by a company to banks and other creditors, but only if they are shareholders in the company.
- Not correct
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