What term describes the portion of profits paid to shareholders?

What term describes the portion of profits paid to shareholders?

• A. Interest
• B. Dividends
• C. Bonuses
• D. Royalties

Answer: (B)

Dividends are the portion of profits paid to shareholders. When a company makes profit, it can choose to reinvest in the business or share some of the earnings with the owners in the form of dividends. These payments are typically declared by the board and made to shareholders based on the number of shares they hold, providing a return on investment. They aren’t guaranteed and depend on profitability and the company’s dividend policy. The other terms refer to different payments: interest is paid to lenders for borrowed funds, bonuses are extra pay to employees, and royalties are payments for the use of someone else’s asset, such as a patent or copyright.

Dividends are the portion of profits paid to shareholders. When a company makes profit, it can choose to reinvest in the business or share some of the earnings with the owners in the form of dividends. These payments are typically declared by the board and made to shareholders based on the number of shares they hold, providing a return on investment. They aren’t guaranteed and depend on profitability and the company’s dividend policy. The other terms refer to different payments: interest is paid to lenders for borrowed funds, bonuses are extra pay to employees, and royalties are payments for the use of someone else’s asset, such as a patent or copyright.