Cash dividends
1. are paid from earnings
2. increase the capacity of the firm to grow
3. reduce the firm's assets

Question

Quizplus · Accepted Answer

1. Cash dividends are indeed paid out of a company's earnings, reflecting the distribution of profits to shareholders. 3. Paying dividends reduces a firm's assets because cash, an asset, is paid out to shareholders, decreasing the company's total assets. Cash dividends do not increase a firm's capacity to grow; in fact, by distributing cash to shareholders, the company has fewer resources to reinvest in its operations for growth.

Cash Dividends 1. Are Paid from Earnings