The Declaration of a Cash Dividend

question 63

Multiple Choice

The declaration of a cash dividend:

• A) reduces liabilities and increases stockholders' equity.
• B) increases liabilities and reduces assets.
• C) increases liabilities and increases stockholders' equity.
• D) increases liabilities and decreases stockholders' equity.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation, associated specifically with manufacturing.

Financial Advantage

The benefit gained in financial terms, which can result in better profitability or cost savings.

Fixed Manufacturing Expenses

Costs associated with production that do not vary with the level of output, including salaries of permanent staff and depreciation of machinery.

Fixed Selling

Refers to the selling expenses that do not change with the level of sales.