Boards of directors may be legally restricted in their declaration of dividends if:

Question

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Boards of directors must consider the financial health of the company and ensure that declaring a dividend does not result in insolvency. They also have a fiduciary duty to act in the best interest of the shareholders, and declaring a dividend that leads to insolvency could be seen as a breach of that duty. Choices A, B, and D are not legal restrictions on declaring dividends.

Boards of Directors May Be Legally Restricted in Their Declaration