Subtracting periodic dividend payouts from total stockholder return yields ____________?
Show answer Hide answer
Answer: C. gain on capital
Explanation
Subtracting periodic dividend payouts from total stockholder return isolates the capital gain component of the return. Total stockholder return combines both dividend income and capital price appreciation earned over a period. Removing the dividend yield leaves only the percentage change in the underlying stock market price. Stockholder return represents the complete financial performance realized from holding equity shares. Dividends are cash distributions paid by corporations from earnings to reward common shareholders. Capital gains reflect the increase in stock market value from purchase to sale or valuation date.
Financial analysts decompose total return to determine whether profits stemmed from dividends or price appreciation. Income investors focus heavily on dividend yields while growth investors prioritize capital gains. Tax authorities tax capital gains and dividend income under separate legal schedules in many jurisdictions. Gain on spot contract relates to derivatives trading rather than equity stockholder return components. Loss on spot contract incorrectly applies derivative market terminology to common stock investments. Loss on capital is incorrect because subtraction isolates gains rather than assuming an automatic loss.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
Related questions
Q1. Multiplying outstanding shares by the stock price yields __________?
Show answer Hide answer
Answer: B. current market values
Multiplying the number of outstanding shares by current market price gives total current market value. This calculation determines the total capitalization of a publicly traded corporate business enterprise. Market capit...
Q2. Transfers executed via intermediaries such as banks or mutual funds are categorized as________________?
Show answer Hide answer
Answer: B. Financial intermediary
Financial intermediaries act as conduits connecting deficit units with surplus savers. Banks and mutual funds pool deposits to allocate capital efficiently across economic sectors. Intermediation reduces transaction cost...
Q3. Prices adjusted daily to reflect current conditions in futures markets are classified as __________?
Show answer Hide answer
Answer: B. market to market prices
Marking to market is the daily accounting practice of adjusting futures contract valuations. Prices are adjusted daily to reflect current market conditions and settlement price changes. This daily settlement process prev...
Q4. The predetermined price agreed upon for buying or selling an underlying asset is designated as ___________?
Show answer Hide answer
Answer: D. both B and C
The predetermined price at which an option contract can be executed is referred to as strike price. This exact same execution price is also widely known in financial terminology as the exercise price. Both terms are inte...
Q5. A position resulting from selling a floor and purchasing a cap is classified as ___________?
Show answer Hide answer
Answer: D. collar
A collar strategy combines purchasing a cap and selling a floor on an underlying asset. This hedging structure limits both the maximum upside and downside returns for the investor. Trading ranges are tightly controlled b...
Q6. Markets where corporations issue new securities to raise capital are designated as _____________?
Show answer Hide answer
Answer: A. primary markets
Primary markets are where corporations issue brand new securities directly to investors. These capital raising transactions allow companies to acquire fresh funding for business expansion. Investment banks frequently und...