Which of the Following Is Not Usually a Restriction on the Payment

question 130

Multiple Choice

Which of the following is not usually a restriction on the payment of dividends?

• A) Dividends must be paid from the current year's net income.
• B) Dividends may not be paid if a company is insolvent.
• C) Bond indentures may restrict the payment of dividends.
• D) If preferred stock has a cumulative feature, no common stock dividends may be paid until cumulative preferred stock dividends are current.
• E) All of the above are restrictions on the payment of dividends.

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Definitions:

Variable Input

A resource or factor of production whose quantity can be changed easily in the short term to adjust production levels.

Diminishing Marginal Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant.

Variable Factor

An input or resource whose quantity can be changed in the short run to adjust production levels.

Total Output

The total quantity of goods or services produced by an economy or firm in a given period.