Paying a dividend leaves a company with fewer assets with which to meet its liabilities to creditors and meet other dema
Posted: Thu May 19, 2022 2:47 pm
Paying a dividend leaves a company with fewer assets with which
to meet its liabilities to creditors and meet other demands for
capital. For this reason, there are legal constraints on the amount
a company can distribute in dividends such as a requirement that
they cannot be paid out of capital but only paid from a company’s
accumulated realized profits less its accumulated realized
losses.
Required: Explain 2 ways for strengthening the distribution of
dividends payment for the future solvency of a company?
to meet its liabilities to creditors and meet other demands for
capital. For this reason, there are legal constraints on the amount
a company can distribute in dividends such as a requirement that
they cannot be paid out of capital but only paid from a company’s
accumulated realized profits less its accumulated realized
losses.
Required: Explain 2 ways for strengthening the distribution of
dividends payment for the future solvency of a company?