1. Which of the following statements regarding dividends is true?
A. Some companies do not pay dividends even when the company is profitable.
B. Stock dividends immediately increase the total value of the stockholders' investment.
C. Cash dividends and stock dividends both decrease total stockholders' equity.
D. A corporation has a legal obligation to pay dividends each year.
2. How many of the following statements regarding earnings per share (EPS) is (are) true?
• The EPS ratio is important because it signals the ability of the company to pay future dividends, which investors factor into the stock price.
• Earnings per share is generally reported in the balance sheet under stockholders' equity.
• Earnings per share is the best way to compare the performance of different companies.
• EPS, in its basic form, is calculated by dividing net income by the average number of all shares issued.