What term describes business profits paid to corporate shareholders based on their number of shares?

What term describes business profits paid to corporate shareholders based on their number of shares?

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

Answer: (A)

Dividends are payments made to shareholders from a corporation’s profits, distributed in proportion to the number of shares owned. The company’s board decides whether to pay them and how much, and they can be in cash or additional shares. This directly describes profits shared with owners based on their ownership stake. Interest is earned on borrowed money, not on ownership; royalties are payments for using someone’s IP or resources; bonuses are extra pay to employees or managers, not to shareholders.

Dividends are payments made to shareholders from a corporation’s profits, distributed in proportion to the number of shares owned. The company’s board decides whether to pay them and how much, and they can be in cash or additional shares. This directly describes profits shared with owners based on their ownership stake. Interest is earned on borrowed money, not on ownership; royalties are payments for using someone’s IP or resources; bonuses are extra pay to employees or managers, not to shareholders.