How does the declaration and payment of a cash dividend affect a firm?
A)decreases stockholders' equity
B)increases stockholders' equity
C)no effect on stockholders' equity or assets
D)decreases stockholders' equity and total assets

Question

Quizplus · Accepted Answer

The declaration and payment of a cash dividend decrease stockholders' equity because the company is distributing part of its earnings to shareholders. It also decreases total assets because cash, an asset, is being paid out.

How Does the Declaration and Payment of a Cash Dividend