If a company wanted to put a limit on cash dividends to ensure they would have enough retained earnings for a specific project intended to expand and grow the company, the appropriation of a portion of retained earnings would be a good strategy.

Question

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By appropriating a portion of retained earnings, the company can ensure that a certain amount of earnings is set aside for the specific project intended to expand and grow the company. This can help limit the amount of cash dividends paid out and ensure that enough earnings are retained to fund the project.

If a Company Wanted to Put a Limit on Cash