A corporation has been paying out $1 million per year in dividends for the past several years.This year,the company wants to pay the $1 million dividend,but can't.All of the following are reasons the company cannot continue its dividend payment policy EXCEPT
A) the company's net income this year is less than $1 million.
B) the company's retained earnings balance at the end of the year is less than $1 million.
C) the company's cash balance is less than $1 million.
D) the company's liabilities exceed its assets.

Question

Quizplus · Accepted Answer

A company's ability to pay dividends is not directly determined by its net income for the current year, as dividends can be paid out of retained earnings from previous years.

A Corporation Has Been Paying Out $1 Million Per Year