Most states prohibit corporations from paying a dividend if a deficit will occur.

Name: Most states prohibit corporations from paying a dividend if a deficit will occur.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is true. In order to protect the rights of creditors and shareholders, most states have laws that prohibit corporations from paying a dividend if it would cause a deficit in the company's finances. This helps ensure that the company has enough funds to meet its obligations and continue operating smoothly.

Most States Prohibit Corporations from Paying a Dividend If a Deficit