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Identify the Reasons Dividends Are Sometimes Paid Out Even When

question 58

Essay

Identify the reasons dividends are sometimes paid out even when funds could be better reinvested in the business or when the firm has to tap outside sources to pay the dividends.


Definitions:

Accrual

The accounting practice that documents income and expenditures at the time they happen, irrespective of the timing of the actual cash flows.

Retained Earnings

The amount of net profit remaining for the company after distributing dividends to its stockholders.

Note Payable

A written promise to pay a specified amount of money, along with interest, by a certain date.

Interest Expense

The cost incurred by an entity for borrowed funds, recognized in the income statement.

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