In order for the board of directors of a corporation to declare a cash dividend,there must be sufficient ________ and ________.
A) revenues; expenses
B) net income; cash
C) retained earnings; cash
D) revenues; cash

Question

Quizplus · Accepted Answer

A cash dividend can only be declared if the corporation has sufficient retained earnings (i.e., profits that have not been distributed as dividends) and cash on hand. Option A is incorrect because expenses are irrelevant to the declaration of a dividend. Option B is partially correct in that net income is a determinant of retained earnings, but it is not sufficient in and of itself for a dividend declaration. Option D is incorrect because revenues do not necessarily equate to profits or retained earnings.

In Order for the Board of Directors of a Corporation