Which of the following BEST describes restrictions on cash dividends and treasury stock purchases?

Question

Quizplus · Accepted Answer

Restrictions on cash dividends and treasury stock purchases are typically put in place by lenders or creditors to ensure that the company maintains adequate levels of equity. This helps to protect the lenders' or creditors' investment in the company and minimize the risk of default. These restrictions can help to ensure that the company is making wise financial decisions and maintaining a stable financial position. Option A is incorrect because restrictions on cash payments do not necessarily ensure higher reported profits. Option C is incorrect because restrictions on payments made by shareholders would not affect the company's ability to pay dividends or repurchase stock. Option D is incorrect because restrictions on dividends and treasury stock purchases would not directly impact sales revenues.

Which of the Following BEST Describes Restrictions on Cash Dividends