Which Term Describes the Profits That Each Entity Could Distribute

question 21

Multiple Choice

Which term describes the profits that each entity could distribute if distributions between the interrelated entities were made continuously until next to nothing was left?

• A) Notional
• B) Reciprocal
• C) Marginal
• D) Consolidated

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Definitions:

Dividend Payout Ratio

The dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends, expressed as a percentage, showing the percentage of earnings distributed as dividends.

Market Price

This represents the price at which a commodity, security, or other financial instrument is traded on the open market and can be purchased or sold.

Common Stock

Signifies holding stakes in a corporation, which provides owners with the right to vote and a portion of the company's earnings via dividends.

Dividends

Payments made by a corporation to its shareholder members, distributing a portion of the company’s earnings.