Question

In: Finance

Companies are not allowed to pay a dividend if it A. cuts into legal capital B....

Companies are not allowed to pay a dividend if it

A. cuts into legal capital

B. the firm made a net loss

C. the managers give up their salary for the accounting period

D. the firm retains a portion of the earnings

Solutions

Expert Solution

Companies are not allowed to pay a dividend if it

A. cuts into legal capital

The company's charter contains information regarding the legal capital it is authorized to issue or the amount that is issued and outstanding. This capital cannot be used to pay a dividend. The only way to cut into legal capital is to do buybacks of share


Related Solutions

The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left...
The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left short of cash. Comment on this statement.
The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left...
The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left short of cash. Comment on this statement.
The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left...
The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left short of cash. Comment on this statement.
Summit Systems has an equity cost of capital of 11.5 % ​, will pay a dividend...
Summit Systems has an equity cost of capital of 11.5 % ​, will pay a dividend of ​$1.00 in one​ year, and its dividends had been expected to grow by 7.0 % per year. You read in the paper that Summit Systems has revised its growth prospects and now expects its dividends to grow at a rate of 2.5 % per year forever a. What is the drop in value of a share of Summit Systems stock based on this​...
Summit Systems has an equity cost of capital of 11.0%​, will pay a dividend of ​$2.25...
Summit Systems has an equity cost of capital of 11.0%​, will pay a dividend of ​$2.25 in one​ year, and its dividends had been expected to grow by 7.0% per year. You read in the paper that Summit Systems has revised its growth prospects and now expects its dividends to grow at a rate of 2.5% per year forever. a. What is the drop in value of a share of Summit Systems stock based on this​ information? b. If you...
(b) What impact is a recession likely to have on companies' dividend yields?
(b) What impact is a recession likely to have on companies' dividend yields?
Fid Corp is considering a capital restructuring in which it would pay a large, special dividend...
Fid Corp is considering a capital restructuring in which it would pay a large, special dividend financed with new debt. Its total capitalization of $100 million would not change but its Debt to Capitalization would increase from 20% to 60%. Fid currently pays 3%/year on its debt, but its investment bankers estimate the interest rate would increase to 6%/year at 60% Debt to Capitalization. Given the information above, what is the capital structure ($Debt + $Equity = $Total Capitalization) for...
why are bailouts for large companies should not be allowed?
why are bailouts for large companies should not be allowed?
Please explain why some companies in the capital market tend to adopt a high dividend policy,...
Please explain why some companies in the capital market tend to adopt a high dividend policy, while others prefer a low dividend policy based on dividend policy theories. And indicate elements companies should consider when determining dividend policy.
Long-answer: Please explain why some companies in the capital market tend to adopt a high dividend...
Long-answer: Please explain why some companies in the capital market tend to adopt a high dividend policy, while others prefer a low dividend policy based on dividend policy theories. And indicate elements companies should consider when determining dividend policy
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT