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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.

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.

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.

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DylanElite · 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."

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## Step 1: Understanding the statements<br /><br />The first step involves comprehending each sentence. <br /><br />## Step 2: Verification of each option<br /><br />Let's check the validity of each statement:<br /><br />Statement 1: A dividend payout reduces the amount of retained earnings held by the company. <br />Correct, as dividends are often paid out from a company's retained earnings.<br /><br />Statement 2: Large businesses typically have a clear and consistent dividend policy. <br />This is also true because significant businesses need to establish and maintain trust with a large number of stakeholders.<br /><br />Statement 3: A dividend is a distribution of profits by a corporation to its shareholders. <br />Yes, dividends indeed represent a share of the company's profits distributed to its shareholders.<br /><br />Statement 4: Ordinary shareholders are entitled to receive dividends first, before preference shareholders can be paid. <br />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.<br /><br />#
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