Dividends reduce:
A) net income.
B) shareholders' equity.
C) cash flow from operations.

Question

Quizplus · Accepted Answer

Dividends reduce shareholders' equity because they are distributions of earnings to shareholders, thus decreasing the retained earnings component of shareholders' equity. They do not directly affect net income, as they are appropriated after net income is calculated. Dividends also do not directly impact cash flow from operations since they are classified under financing activities in the statement of cash flows.

Dividends Reduce