Question

Which of the following is a true statement about corporate dividends?

1) Corporate dividends are paid to shareholders as a return on their investment.
2) Corporate dividends are only paid to employees of the company.
3) Corporate dividends are always paid in cash.
4) Corporate dividends are not subject to taxation.

Answer 1

The correct statement about corporate dividends is that they are paid to shareholders as a return on their investment. Dividends are payments made from a corporation's profits and are taxable. They can be paid in cash or other forms and are not exclusive to company employees.

Step-by-step explanation:

The true statement about corporate dividends from the options provided is: Corporate dividends are paid to shareholders as a return on their investment. When a corporation earns a profit, it can choose to pay a portion of these profits directly to its shareholders in the form of dividends. The amount a shareholder receives is proportional to the number of shares they own. For example, if a stock pays a dividend of 75 cents per share, an owner of 85 shares would receive a sum based on that rate.

It is important to note that dividends are not exclusive to employees of the company; they are paid to all shareholders. Additionally, dividends can be paid in forms other than cash, such as additional shares of stock or other property. Lastly, dividends are typically subject to taxation, so the statement that they are not taxed is false.