SIE practice questioneasyCommon Stock — Dividends
Which of the following statements about common stock dividends is correct?
- ACommon stock dividends must be declared by the board of directors✓ Correct answer
- BCommon stock dividends are always paid quarterly
- CCommon stock dividends are a tax-deductible expense for the corporation
- DCommon stock dividends are guaranteed by the corporation
Explanation
Why A — Common stock dividends must be declared by the board of directors
Common stock dividends must be declared by the board of directors and are never guaranteed. Companies are not required to pay them quarterly, and common stock dividends are paid from after-tax profits rather than deducted by the corporation.
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