Which of the Following Statements Best Describes the Role of Current

question 33

Multiple Choice

Which of the following statements best describes the role of current and accumulated earnings and profits in determining if a distribution is a dividend?

• A) A distribution will never be a dividend if current earnings and profits for the year are negative, even if accumulated earnings and profits is positive.
• B) A distribution will only be a dividend if total earnings and profits (current plus accumulated) is positive at the time of the distribution.
• C) At a minimum, some portion of the distribution will be a dividend if current earnings and profits for the year are positive, even if accumulated earnings and profits are negative.
• D) A distribution can never be a dividend if current earnings and profits are negative.

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Definitions:

Economic Values

The worth of goods or services determined by their utility and scarcity in relation to consumer demand.

Annuities

Financial products that pay out a fixed stream of payments to an individual, typically used as part of retirement planning.

Compounded Semi-Annually

An interest calculation method where interest is added to the principal sum of a deposit or loan at mid-year and end-of-year, resulting in interest earning interest.

Guaranteed Contract

An agreement ensuring certain terms are fulfilled, often used in the context of employment contracts guaranteeing payment.