Board of Directors May Be Legally Restricted in Their Declaration

question 38

Multiple Choice

Board of directors may be legally restricted in their declaration of dividends if:

• A)the cash must be borrowed for the dividend payment.
• B)dividends have increased substantially over a short period of time.
• C)the dividend would create a situation of insolvency.
• D)the stock is selling at a low relative price.

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Definitions:

Process Costing

A method of costing used to ascertain the cost of a product at each process or stage of manufacture.

Direct Materials

Raw materials that are directly traceable to the production of a specific product or service.

Work in Process Inventory

Work in Process Inventory represents the cost of incomplete goods in the manufacturing process, including labor, raw materials, and overhead costs.

Equivalent Units

A concept used in cost accounting to express the amount of work done by various units of production collectively, taking into account both complete and partially complete units.