Which of the Following Is a Difference Between Dividends on Stock

question 64

Multiple Choice

Which of the following is a difference between dividends on stock and interest on bonds?

• A) A firm has a legal obligation to pay interest on bonds, whereas it has no legal obligation to pay dividends on stock.
• B) Dividend on stock is paid by the issuer of the stock, whereas interest on bond is paid by the bondholder.
• C) A firm has a legal obligation to pay dividends on stock, whereas it has no legal obligation to pay interest on bonds.
• D) Dividend on stock is paid by the stockholder, whereas interest on bond is paid by the issuer of the bond.

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Definitions:

Standard Costs

Preset costs for materials, labor, and overhead used to measure the performance of manufacturing activities against planned costs.

Variable Costing

A costing method where only variable costs are charged to product costs, with fixed costs treated as period costs.

Absorption Costing

A cost accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes involved in maintaining the operation.