Question

Q6. Payment of dividend by a company results in

A) Decrease in equity that represents a loss.

B) Decrease in equity that represents distribution to owners.

C) Decrease in equity that represents an expense.

D) None of the above.

Answer 1

Answer:

Arguments for Dividends

As a result, a company that pays out a dividend attracts investors and creates demand for their stock. Dividends are also attractive for investors looking to generate income. However, a decrease or increase in dividend distributions can affect the price of a security.

Explanation:

so, the answer is B

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Answer 2

The correct option is B) Decrease in equity that represents distribution to owners.

• A dividend represents the sum of money given by an enterprise to its main shareholders from its profits or reserves.
• When a firm distributes it to the shareholders, the considerable amount of all dividends paid reduces the equity of the owner.
• These are the cash outflows to the owners of a firm which are reported as a marked reduction in the accounting for cash and retained earnings