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Question

Dividends are paid out of ____________.
  1. Accumulated Profit
  2. Gross Profit
  3. Profit after Tax
  4. General Reserve

A
Gross Profit
B
Profit after Tax
C
General Reserve
D
Accumulated Profit
Solution
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A dividend is a payment made by corporation to its shareholders, usually as a distribution of profits. When a corporation earns profit or surplus, the corporation is able to re-invest its profits in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders.

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