The Declaration and Issuance of a Common Stock Dividend

question 25

Multiple Choice

The declaration and issuance of a common stock dividend:

• A) Does not change the internal content of retained earnings.
• B) Does not change assets, liabilities or total owners' equity.
• C) Decreases total owners' equity and increases the related common stock account.
• D) Decreases assets and decreases total owner's equity.

---

Definitions:

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Real Rate of Return

The annual percentage return realized on an investment, adjusted for changes in prices due to inflation or other external factors.

Inflation Rate

The pace at which prices for goods and services elevate overall, causing the value of purchasing power to drop.

Risk-Free Asset Return

Risk-Free Asset Return denotes the amount of return expected from an investment with no risk of financial loss, typically associated with government bonds.