Select the effect (a, b, or c) that each transaction listed in would most likely cause on the debt/equity ratio.
-Declared dividends to shareholders

Question

Quizplus · Accepted Answer

Declaring dividends to shareholders reduces equity because dividends are paid out of retained earnings, which is a component of shareholders' equity. When equity decreases while debt remains constant, the debt/equity ratio increases.

Select the Effect (A, B, or C) That Each Transaction