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 can still pay dividends even if its net income is less than the dividend amount, as long as it has sufficient retained earnings and cash to cover the dividend payment.

A Corporation Has Been Paying Out $1 Million Per Year