Which of the Following Would Be a Reason for a Company

question 146

Multiple Choice

Which of the following would be a reason for a company to restrict its cash dividends or treasury stock purchases?

• A) Because the company needs treasury stock to offer as performance incentives to upper management
• B) In order to give shareholders stock dividends
• C) Due to the desire of shareholders to retain the company's earnings for future growth and capital expenditures
• D) Due to requirements of lenders or creditors that companies maintain enough equity to meet their obligations

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Definitions:

Journal Entries

Records in accounting that document financial transactions in the books of account, showing the debit and credit of each transaction.

Dividends

Payments made by a corporation to its shareholders from its profits or reserves.

Balance Sheet Errors

Mistakes that occur in the preparation of the balance sheet, including misclassifications, incorrect amounts, or omitted transactions.

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders as dividends, typically used for reinvestment.