Which of the following statements is correct in relation to the payment of dividends?
A) Dividends can only be paid if a company has generated a profit in the current period.
B) The payment of dividends is regulated by the Corporations Act.
C) A company can only pay an interim dividend if its constitution allows it.
D) Preference dividends must be paid on a cumulative basis.

Question

Quizplus · Accepted Answer

The payment of dividends is regulated by the Corporations Act, which sets out the rules and requirements for companies in relation to the payment of dividends. This includes requirements around solvency, disclosure, and shareholder approval. The other statements are not entirely accurate. While dividends are typically paid out of profits, companies may also pay dividends out of reserves or other sources of funds. In addition, a company may be able to pay an interim dividend even if its constitution does not expressly allow for it, depending on the circumstances. Finally, while preference dividends are generally paid on a cumulative basis, this is not always the case and may depend on the terms of the preference shares.

Which of the Following Statements Is Correct in Relation to the Payment