A company's total return to shareholders consists of which of the following?

• A. Net income plus other comprehensive income
• B. Retained earnings only
• C. Dividends paid to shareholders
• D. Net income only

Answer: (A)

Verified step by step guidance

1. Understand the concept of 'total return to shareholders': This refers to the overall financial benefit shareholders receive from their investment in a company, which includes both direct payments (like dividends) and changes in the value of their equity (such as retained earnings and comprehensive income).
2. Break down the components: Net income represents the company's profit after expenses, taxes, and costs. Other comprehensive income includes items not included in net income, such as unrealized gains or losses on investments, foreign currency translation adjustments, and pension adjustments.
3. Analyze the options: Retained earnings are the portion of net income that is not distributed as dividends but reinvested in the company. Dividends are direct payments to shareholders. Net income alone does not account for other comprehensive income or dividends.
4. Combine the relevant components: The total return to shareholders includes net income and other comprehensive income, as these represent the full scope of financial benefits accruing to shareholders.
5. Conclude the correct answer: Based on the analysis, the total return to shareholders consists of 'Net income plus other comprehensive income,' as this encompasses both direct and indirect financial benefits.