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Which of the statements below is FALSE?a. For the shareholder, receipt of dividends is a taxable event.b. A typical practice of many companies is to distribute part of the earnings to shareholders through cash dividends.c. Unlike coupon payments on bonds, which are treated as an interest expense of the firm, common stock dividends are considered a return of capital to shareholders and not an expense of the firm.d. The payment of cash dividends to shareholders is a deductible expense for the company.

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Answer:

The correct answer is letter "D": The payment of cash dividends to shareholders is a deductible expense for the company.

Explanation:

Cash dividends are the returns that a company distributes among its stockholders. The payments are done periodically, usually once a year but the frequency varies from one company to another. In some other cases, the company decides not to pay out dividends holding the money for reinvestment which is called Retained Earnings.

The payment of cash dividends does not represent any tax benefit for companies. Income tax is charged over the returns.

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