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The declaration of cash dividends reduces retained earnings.Group startsTrue or False

Question

The declaration of cash dividends reduces retained earnings.Group startsTrue or False

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Solution

True. When a company declares cash dividends, it reduces the amount of retained earnings, which is part of shareholders' equity on the balance sheet. The cash dividends are a distribution of the company's earnings to its shareholders. Therefore, the retained earnings account decreases when cash dividends are declared.

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