While an Earnings Requirement Limiting the Amount of Dividends Paid

question 42

True/False

While an earnings requirement limiting the amount of dividends paid is sometimes imposed, the firm is not prohibited from paying more in dividends than its current earnings.

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Definitions:

Book Value

The worth of an asset as indicated by its balance sheet account balance, which considers the asset's original cost less any depreciation, amortization, or impairment charges.

Dividends in Arrears

Unpaid dividends on preferred stock that accumulate until paid by the corporation, often before any dividends can be paid on common stock.

Par Value

A nominal or face value assigned to a share of stock, bonds, or other securities as stated in the corporate charter or on the stock certificate.

Dividend Rate

The amount of dividend that a company pays out to its shareholders annually, usually expressed as a percentage of the stock's current market price or as a fixed amount per share.