DECA Marketing Cluster Practice Exam

What term describes a sum of money paid regularly to shareholders from profits?

1. Dividend

2. Commission

3. Salary

4. Bonus

The correct answer is: Dividend

The term that describes a sum of money paid regularly to shareholders from profits is "dividend." Dividends are payments made by a corporation to its shareholders, usually as a distribution of profits. When a company earns a profit or surplus, it can decide to reinvest it in the business, pay down debt, or distribute a portion of it to shareholders in the form of dividends. This practice incentivizes shareholders to invest in the company, as they receive a return on their investment without needing to sell their shares. In contrast, commission refers to a fee paid to agents or employees based on the sales they generate, salary represents regular compensation paid to employees for their work, and a bonus is a one-time financial reward given to employees, often based on performance or company profitability, rather than a consistent return to shareholders.