What defines a 'dividend'?

A 'dividend' is defined as a payment made by a corporation to its shareholders from its profits. This understanding is fundamental in company law and corporate finance, as dividends represent a portion of earnings that a company decides to distribute to its owners rather than reinvest back into the business.

Dividends can take various forms, including cash payments or additional shares of stock, and they serve as a reward for shareholders who have invested in the company. This distribution mechanism is crucial for maintaining investor interest and providing returns on investment.

The other options do not accurately reflect the definition of a dividend. A tax imposed on corporate profits refers to obligations payable to the government and is not a distribution to shareholders. A repayment made by a corporation to its creditors pertains to debts and obligations rather than profit distribution. Shares issued to employees as part of a benefits package relate to employee compensation and equity ownership, which again does not fall within the conventional definition of dividends.