Dividends:
A) always affect net income
B) are expenses
C) must be paid to shareholders when the company earns a profit
D) are distributions to shareholders of assets (usually cash) generated by net income

Question

Quizplus · Accepted Answer

Dividends are distributions to shareholders of assets, usually cash, generated by net income. They do not affect net income and are not expenses. Additionally, dividends do not have to be paid to shareholders even if the company earns a profit, as the company may choose to reinvest the profits instead.