Payment of a cash dividend decreases both cash and stockholders' equity of the distributing business.

Name: Payment of a cash dividend decreases both cash and stockholders' equity of the distributing business.
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

​Payment of a cash dividend decreases both cash and stockholders' equity of the distributing business.

Quizplus · Accepted Answer

When a business pays a cash dividend, it decreases its cash reserves and reduces the amount of retained earnings, which is a component of stockholders' equity. Therefore, both cash and stockholders' equity are reduced by the payment of a cash dividend.

​Payment of a Cash Dividend Decreases Both Cash and Stockholders

Payment of a Cash Dividend Decreases Both Cash and Stockholders