Which of the Following Best Describes Restrictions on Cash Dividends

question 120

Multiple Choice

Which of the following best describes restrictions on cash dividends and treasury stock purchases?

• A)restrictions on cash payments that are made to ensure higher reported profits
• B)limits required by lenders or creditors to ensure that the company maintains adequate levels of equity
• C)restrictions on payments made by the shareholders to lower federal income tax expense
• D)limits that are established to boost sales revenues

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Definitions:

Private Investment

Private Investment encompasses the expenditures on capital assets by private businesses or individuals, excluding government spending.

Business Optimism

A positive outlook or sentiment held by businesses about the future economic conditions, often leading to increased investment and growth plans.

Price Floor

A minimum price set by regulation or agreement, preventing prices of goods or services from dropping below this threshold, aimed at supporting producers.

Equilibrium Price

The price at which the quantity demanded by consumers equals the quantity supplied by producers, resulting in market balance.