Explain Why Dividends Paid by Subsidiaries Out of Pre-Acquisition Profits

question 37

Essay

Explain why dividends paid by subsidiaries out of pre-acquisition profits will result in impairment of the parent company's investment in subsidiary asset.

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Definitions:

Butcher

A professional who prepares meat for sale, often by slaughtering animals, dressing their flesh, and cutting it into pieces.

Laterally Rotate

To rotate a limb or an organ around its long axis away from the midline of the body.

Trapezius

A large, triangular muscle extending over the back of the neck and shoulders, responsible for moving the scapula and support of the arm.

Levator Scapulae

A muscle in the back and side of the neck that elevates the scapular (shoulder blade).