Which of the following is not a legal restriction related to profit distributions by a corporation?
A) The amount distributed to owners must be in compliance with the state laws governing corporations.
B) The amount distributed in any one year can never exceed the net income reported for that year.
C) Profit distributions must be formally approved by the board of directors.
D) Dividends must be in full agreement with the capital stock contracts as to preferences and participation.

Question

Quizplus · Accepted Answer

While corporations are subject to various legal restrictions related to profit distributions, there is no legal requirement that the amount distributed in any one year cannot exceed the net income reported for that year. In fact, many corporations may choose to distribute more than their reported net income in a given year by drawing on retained earnings or issuing debt. However, such decisions will likely have implications for the corporation's financial health and future ability to pay dividends.

Which of the Following Is Not a Legal Restriction Related