Dividends can only be distributed if the firm has positive income in the year the dividend is paid.

Question

Quizplus · Accepted Answer

While it is true that dividends are typically distributed from a company's profits, a company can also pay dividends out of its retained earnings (profits from previous years) or through debt financing. Therefore, a firm does not necessarily have to have positive income in the year of the dividend payment to distribute dividends.

Dividends Can Only Be Distributed If the Firm Has Positive