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

jeff jeffy answered 2 years ago
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