The earned surplus test for the issuance of dividends by a corporation is less restrictive than the surplus test.

Name: The earned surplus test for the issuance of dividends by a corporation is less restrictive than the surplus test.
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The earned surplus test, which allows dividends to be paid only out of profits, is generally more restrictive than the surplus test, which can include both earned surplus and additional paid-in capital.

The Earned Surplus Test for the Issuance of Dividends by a Corporation