Which of the following statements is true concerning the declaration and payment of cash dividends?
A)Declaration and payment of cash dividends will reduce the amount of net income.
B)Declaration and payment of cash dividends will not reduce the retained earnings balance.
C)Declaration and payment of cash dividends will reduce the amount of resources available to invest in assets.
D)Declaration and payment of cash dividends is calculated on the amount of shares of stock issued,not the amount of shares outstanding.

Question

Quizplus · Accepted Answer

When cash dividends are declared and paid, the amount of resources available for investment in assets is reduced as a portion of the company's cash is distributed to shareholders. Option A is incorrect because the declaration and payment of cash dividends do not impact net income. Option B is incorrect because the retained earnings balance is reduced when cash dividends are paid. Option D is incorrect because cash dividends are calculated on the shares of stock outstanding, not the shares issued.

Which of the Following Statements Is True Concerning the Declaration