When a corporation decides whether to pay a cash dividend, which of the following is an important consideration?

Question

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When a corporation decides whether to pay a cash dividend, an important consideration is:
a. The balances in the corporation's cash and retained earnings accounts.
This is because dividends are paid out of a company's available cash, and the decision to pay dividends must take into account the company's liquidity and cash flow needs. The retained earnings account reflects the accumulated net income that has not been distributed to shareholders as dividends and is a source from which cash dividends can be paid. The board of directors must ensure that there are sufficient cash and retained earnings to cover the dividend payment without jeopardizing the company's financial stability or its ability to invest in future growth opportunities.
The other options listed are not directly related to the decision to pay dividends:
b. The number of authorized shares of the corporation's stock is related to the company's ability to issue more shares, not its dividend policy.
c. The book value of the corporation's stock is an accounting measure and does not directly affect the decision to pay dividends.
d. The balance of paid-in capital in excess of par on the corporation's stock accounts represents the amount shareholders have invested over the par value of the shares. While this reflects the company's equity, it is not a determinant in the decision to pay cash dividends.

When a Corporation Decides Whether to Pay a Cash Dividend