A corporation commits to a legal obligation when it declares

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When a corporation declares a cash dividend, it legally commits to distributing the declared amount to its shareholders, creating a liability on its books until the payment is made. Stock dividends, on the other hand, do not involve a cash outflow and therefore do not create a legal obligation in the same way. The percentage of a stock dividend or setting a distribution date does not create a legal obligation comparable to declaring a cash dividend.

A Corporation Commits to a Legal Obligation When It Declares