Firms are usually prohibited by state law from distributing ________.
A) retained earnings as dividends
B) paid-in capital in excess of par as dividends
C) dividends in a year the firm has a net loss
D) preferred dividends

Question

Quizplus · Accepted Answer

Paid-in capital in excess of par is part of the equity capital contributed by shareholders over and above the nominal or par value of the shares. This capital is not typically distributed as dividends because it represents the funds contributed directly by shareholders, not the earnings generated by the company's operations. Distributing this capital would be akin to returning part of the shareholders' initial investment rather than sharing the profits earned by the company.

Firms Are Usually Prohibited by State Law from Distributing ________