Dividends paid: Group of answer choices increase assets. increase expenses. decrease revenues. decrease retained earnings.
Question
Dividends paid: Group of answer choices
increase assets.
increase expenses.
decrease revenues.
decrease retained earnings.
Solution
Dividends paid:
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Do not increase assets. Dividends are a distribution of a company's earnings to its shareholders. When dividends are paid, cash (an asset) decreases.
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Do not increase expenses. Dividends are not considered an expense. They are a distribution of profits to shareholders and do not affect the company's income statement.
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Do not decrease revenues. Dividends are paid out of retained earnings (profits that have been kept in the company), not out of revenues.
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Decrease retained earnings. This is the correct answer. When dividends are paid, they are deducted from retained earnings. This is because dividends are a distribution of a company's profits (which are part of retained earnings) to its shareholders.
Similar Questions
Dividends paid: a. decrease revenues. b. decrease equity. c. increase liability. d. increase expenses.
When a company pays a dividend the: Group of answer choices Dividend Paid account will increase with a debit. Dividends Paid account will be increased with a credit. Retained Earnings account will be directly increased with a credit. Dividends Paid account will be decreased with a debit.
Dividend policy of a firm is governed by:(i) Long Term Financing Decision:As we know that one of the financing options is ‘Equity’. Equity can either be raisedexternally through issue of new equity shares or can be generated internally throughretained earnings. For Equity, retained earnings are preferable because they do notinvolve any floatation costs (issue expenses).But whether to retain or distribute the profits, forms the basis of this decision.Further, payment of cash dividend reduces the amount of funds required to financeprofitable investment opportunities thereby restricting its financing options.In this backdrop, the decision is based on the following:1. Whether the organization has opportunities in hand to invest the profit,if retained?2. Whether the return on such investment (ROI) will be higher than theexpectations of shareholders i.e. Ke?
If retained earnings increases from the beginning of the year to the end of the year, then:Group of answer choicesprofit is less than dividends paid.profit is greater than dividends paid.additional investments are less than losses.dividends paid are greater than profit.
It refers to the amount of accumulated profits and gains realized out of the normal and continuous operations of the corporation after deducting therefrom distributions to stockholders and transfers to capital stock or other accounts, and which is not appropriated for definite corporate expansion projects or programs, not covered by a restriction for dividend declaration under a loan agreement, and not required to be retained under special circumstances obtaining in the corporation, such as when there is a need for a special reserve for probable contingencies.Group of answer choicesStock dividendsBonded indebtednessCash dividendsUnrestricted retained earnings
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