Question
Which of the following statements is false about dividends: A dividend payout reduces the amount of retained earnings held by the company. Large businesses typically have a clear and consistent dividend policy. A dividend is a distribution of profits by a corporation to its shareholders. Ordinary shareholders are entitled to receive dividends first.before preference shareholders can be paid.
Answer
4.1
(244 Votes)
Dylan
Elite · Tutor for 8 years
Answer
The false statement about dividends is: „Ordinary shareholders are entitled to receive dividends first, before preference shareholders can be paid."
Explanation
## Step 1: Understanding the statementsThe first step involves comprehending each sentence. ## Step 2: Verification of each optionLet's check the validity of each statement:Statement 1: A dividend payout reduces the amount of retained earnings held by the company. Correct, as dividends are often paid out from a company's retained earnings.Statement 2: Large businesses typically have a clear and consistent dividend policy. This is also true because significant businesses need to establish and maintain trust with a large number of stakeholders.Statement 3: A dividend is a distribution of profits by a corporation to its shareholders. Yes, dividends indeed represent a share of the company's profits distributed to its shareholders.Statement 4: Ordinary shareholders are entitled to receive dividends first, before preference shareholders can be paid. This statement is false. In actuality, preference shareholders get paid dividends before ordinary shareholders. It's a key difference between these two types of shareholders and hence is an incorrect statement.#