A major difference between dividends and capital gains is that:
A) Capital gains are always positive.
B) Capital gains affect the total return while dividends do not.
C) Capital gains are in increase in stock price while dividends are cash payments to stockholders.
D) Dividends affect the total return while capital gains do not.
E) Capital gains are only accounted for on an annual basis while dividends are accounted for when paid.

Question

Quizplus · Accepted Answer

Capital gains refer to an increase in the stock's price, while dividends refer to cash payments made by the company to its shareholders. Therefore, C is the correct choice as it accurately describes the difference between dividends and capital gains. B and D are incorrect since dividends and capital gains both affect the total return of an investment. A and E are incorrect because capital gains and dividends aren't tied to any specific sign or timing.

A Major Difference Between Dividends and Capital Gains Is That