Asked by
Kingsley Webber
on Nov 14, 2024
Verified
If the board of directors authorizes a $1000000 restriction of retained earnings for a future plant expansion the effect of this action is to
A) decrease total assets and total stockholders' equity.
B) increase stockholders' equity and decrease total liabilities.
C) decrease total retained earnings and increase total liabilities.
D) reduce the amount of retained earnings available for dividend declarations.
Retained Earnings
The portion of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt.
Plant Expansion
The process of increasing the capacity or capabilities of existing facilities through additional space, equipment, or technology.
Dividend Declarations
A corporate action where a company announces the payment of dividends to its shareholders.
- Comprehend the function and impact of accumulated profits, together with the limitations and modifications, on the allocation of dividends.
- Evaluate the strategic motivations for distributing stock dividends and their possible effects on the valuation of the company and equity of shareholders.
Verified Answer
MS
Learning Objectives
- Comprehend the function and impact of accumulated profits, together with the limitations and modifications, on the allocation of dividends.
- Evaluate the strategic motivations for distributing stock dividends and their possible effects on the valuation of the company and equity of shareholders.