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 — they are never guaranteed (A is wrong). While many companies pay quarterly, there is no requirement to do so (C is wrong). Dividends are paid from after-tax profits and are NOT tax-deductible for the corporation (D is wrong), unlike bond interest payments.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Equity Securities questions
- A callable preferred stock is MOST likely to be called by the issuer when:
- An investor holds convertible preferred stock with a conversion ratio of 4:1 (4 shares of common for each preferred…
- An investor owns 200 shares of XYZ stock at $80 per share. After a 2-for-1 stock split, the investor will have:
- An investor owns 100 shares of stock and there are 3 board seats up for election. Under cumulative voting, how many…