In Order for a Company to Pay a Dividend

question 155

Multiple Choice

In order for a company to pay a dividend:

• A)it must have enough retained earnings to declare the dividend.
• B)it must have enough cash to pay the dividend.
• C)it must have a legal liability to do so.
• D)both A and B must occur.

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Definitions:

Profitability Order

This term does not refer to a specific accounting or financial metric but generally could mean prioritizing products, services, or projects based on their profitability.

Current Profitability

The measure of a company's current profit levels, often assessed through metrics like net income or operating profit.

Variable Costs

Expenses that vary directly with the amount of output or sales.

Fixed Manufacturing Overhead

Regular, unchanged costs incurred during the manufacturing process, regardless of production volume, such as salaries of permanent staff and rent.