Which of the Following Statements About the Declaration and Payment

question 203

Multiple Choice

Which of the following statements about the declaration and payment of cash dividends is correct?

• A)Declaration and payment of cash dividends will reduce the amount of net income.
• B)Declaration and payment of cash dividends will not reduce the Retained Earnings balance.
• C)Declaration and payment of cash dividends will reduce the amount of cash available to invest in assets.
• D)Declaration and payment of cash dividends is calculated on the amount of shares of stock issued,not the amount of shares outstanding.

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Definitions:

Equivalent Annual Annuity

A method used in financial analysis to compare the profitability of investments with differing durations by converting values into equal annual payments.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionally weighted.

Discounted Payback

A capital budgeting procedure that calculates the time required to break even from an investment, accounting for the time value of money.

Cash Flow

The net amount of cash being transferred into and out of a business, a key indicator of financial health.