Which term describes the distribution of a company's earnings to shareholders?

Which term describes the distribution of a company's earnings to shareholders?

• A. Yield
• B. Prospectus
• C. Capital Asset
• D. Dividends

Answer: (D)

Distributing earnings to shareholders happens through dividends. Dividends are payments—cash or additional shares—made from a company’s profits to its owners. They are the actual distribution of earnings. Yield, by contrast, is a rate of return calculated from dividend income relative to the stock price, not the act of paying out profits. A prospectus is the document that describes a security offering, and a capital asset is a long-term asset used in business. For example, if a company earns more than it keeps, it may pay a cash dividend of $1 per share to shareholders, which is the distribution of profits.

Distributing earnings to shareholders happens through dividends. Dividends are payments—cash or additional shares—made from a company’s profits to its owners. They are the actual distribution of earnings. Yield, by contrast, is a rate of return calculated from dividend income relative to the stock price, not the act of paying out profits. A prospectus is the document that describes a security offering, and a capital asset is a long-term asset used in business. For example, if a company earns more than it keeps, it may pay a cash dividend of $1 per share to shareholders, which is the distribution of profits.