Question : Dividends on equity shares are:
Option 1: Fixed and predetermined
Option 2: Not distributed to shareholders
Option 3: Paid out of company profits
Option 4: Paid only to preference shareholders
Correct Answer: Paid out of company profits
Solution : The correct answer is (c) Paid out of company profits
Dividends on equity shares are paid out of company profits. When a company generates profits, it can choose to distribute a portion of those profits to its shareholders in the form of dividends. Equity shareholders, who hold ownership in the company, are eligible to receive dividends based on the company's profitability and the decisions made by its management. Unlike interest payments on fixed-income securities, dividends on equity shares are not fixed and predetermined. The amount of dividends can vary from year to year and is typically determined by factors such as the company's financial performance, earnings, cash flow, and the board of directors' decision.
