The correct answer is: C. Recommended by the directors and approved by the shareholders.
A dividend is a distribution of a portion of a company’s earnings, decided by its board of directors, to a class of its shareholders. The distribution is in proportion to the number of shares held.
A dividend becomes payable when it is recommended by the directors and approved by the shareholders. The directors are responsible for recommending the amount of the dividend, and the shareholders are responsible for approving it. The dividend is then paid out to the shareholders on a date specified by the board of directors.
Option A is incorrect because the directors are responsible for recommending the amount of the dividend, but the shareholders are responsible for approving it.
Option B is incorrect because the shareholders are responsible for approving the dividend, but the directors are responsible for recommending it.
Option D is incorrect because the creditors are not involved in the decision to pay a dividend.