A firm's balance sheet discloses cash of $300,000, other assets of $700,000, liabilities of $500,000, preferred stock of $100,000, common stock of $200,000, and retained earnings of $200,000. What is the maximum cash dividend the firm can pay?

Question

Quizplus · Accepted Answer

The maximum cash dividend the firm can pay is limited by its retained earnings, which amount to $200,000. Dividends are paid out of retained earnings, not from the total cash or assets a company has.

A Firm's Balance Sheet Discloses Cash of $300,000, Other Assets