Asked by Jenna Raney on May 11, 2024
Verified
A company's assets and stockholders' equity both decrease when a cash dividend is declared by the company's board of directors.
Stockholders' Equity
The residual interest in the assets of a corporation after deducting its liabilities; also known as shareholder's equity.
Cash Dividend
A distribution of a company's earnings to its shareholders as actual cash.
Assets
Resources owned or controlled by a person or business, which are expected to produce economic value or benefit in the future.
- Gain insight into how transactions involving dividends and treasury stocks influence a company's fiscal documentation.
- Grasp the impact of declaring and paying cash dividends on a company's liabilities and stockholders' equity.
Verified Answer
NB
Nicolas BellemareMay 15, 2024
Final Answer :
False
Explanation :
When a cash dividend is declared by a company's board of directors, it results in a decrease in the company's retained earnings (part of stockholders' equity) and an increase in its current liabilities (dividends payable), but the total assets do not decrease until the dividend is actually paid out.
Learning Objectives
- Gain insight into how transactions involving dividends and treasury stocks influence a company's fiscal documentation.
- Grasp the impact of declaring and paying cash dividends on a company's liabilities and stockholders' equity.