Which One of the Following Is Not a Reason Why

question 99

Multiple Choice

Which one of the following is not a reason why a corporation's ability to pay dividends may be restricted?

• A)An agreement with bondholders may require that the balance of retained earnings be maintained at a minimum level.
• B)The board of directors may set aside designated amounts for future expansion or other business purposes.
• C)State laws may require that the retained earnings balance cannot fall below the cost of treasury stock.
• D)The corporate charter may require that transactions with nonowners be excluded from retained earnings.

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Definitions:

Deficit

An economic condition where expenditures exceed revenue, common in government budgets.

Surplus

A situation where the quantity supplied of a good or service exceeds the quantity demanded at the current price.

Deflationary Gap

A situation where total spending (aggregate demand) in an economy is lower than the level required to sustain full employment output, leading to deflation and unemployment.

Equilibrium GDP

The level of Gross Domestic Product at which aggregate supply equals aggregate demand, leading to an economy operating at full capacity without inflationary pressures.