In Spite of the Fact That a Corporation Does Not

question 6

Multiple Choice

In spite of the fact that a corporation does not meet the solvency test,it can

• A)buy back shares.
• B)pay wages to employees.
• C)pay dividends.
• D)make loans to directors.
• E)none of the above

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Definitions:

Retained Earnings

The portion of a company's profits not distributed as dividends to shareholders but reinvested in the business.

Dividend

A segment of a corporation's profits given out to its shareholders, typically as cash or more shares.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and equity at a specific point in time.

Dividend Controversy

Dividend controversy revolves around the debate on whether companies should distribute profits to shareholders as dividends or reinvest them in the business.