A firm's balance sheet discloses cash of $300,000, other assets of $600,000, liabilities of $500,000, preferred stock of $100,000, common stock of $200,000, and retained earnings of $100,000. What is the maximum cash dividend the firm can pay?

Question

Quizplus · Accepted Answer

The maximum cash dividend a firm can pay is equal to its retained earnings. In this case, the firm's retained earnings are $100,000, so the maximum cash dividend it can pay is also $100,000.

A Firm's Balance Sheet Discloses Cash of $300,000, Other Assets