Which of the following statements concerning dividends is correct?
A) Firms are under no legal obligation to pay dividends to shareholders.
B) Earnings that are paid in dividends are reinvested in the firm.
C) Earnings that are paid in dividends contribute additional equity capita.l
D) Companies that pay dividends try to decrease the amount of the dividends paid every year.

Question

Quizplus · Accepted Answer

Firms are not legally required to pay dividends to shareholders. It is at the discretion of the company's management and board of directors to decide whether to issue dividends or retain earnings for other purposes such as reinvestment in the business or debt reduction.

Which of the Following Statements Concerning Dividends Is Correct