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CFP Certified Financial Planner Test Prep

Category - Accounting

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Which of the following is considered a distribution of a corporation’s net income?

Common stock
Preferred stock
Dividends
Stockholder’s equity
Treasury stock

Explanation

Answer - C - Dividends are a distribution of a corporation’s net income.

Key Takeaway: Dividends are distributions of the corporation’s net income. They are similar to the withdrawals that the owner of a sole proprietorship would make. Dividends are not considered expenses.

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