Which of the Following Statements Correctly Describes What Dividends a Company

question 14

Multiple Choice

Which of the following statements correctly describes what dividends a company may pay?

• A) They may pay dividends at a level to be decided by the board.
• B) They may not pay dividends.
• C) They may pay dividends up to the point at which gearing does not fall below the rate for the previous year.
• D) They may pay dividends but only up to the point that they have retained profits from previous years.

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Definitions:

Journal Entries

These are recordings of financial transactions in the accounting books, documenting the debit and credit accounts affected by each transaction.

Purchase

The action of buying goods or services for business use or resale.

Par Value

The face value of a bond or stock, representing the amount the issuer agrees to pay at maturity (for bonds) or the nominal value of a share.

Carrying Value

Also known as the book value, it is the value of an asset as reported on the balance sheet, calculated as the original cost minus accumulated depreciation, depletion, or amortization.