Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Which one of the following is NOT necessary in order for a corporation to pay a cash dividend?

Sufficient retained earnings

A formal declaration of dividends by the board of directors

Approval from all common shareholders

Adequate cash balance

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Verified step by step guidance

Understand the concept of cash dividends: A cash dividend is a payment made by a corporation to its shareholders, typically from its profits or retained earnings. Certain conditions must be met for a corporation to pay a cash dividend.

Review the necessary conditions for paying a cash dividend: These include having sufficient retained earnings (to ensure the company has enough profits to distribute), a formal declaration of dividends by the board of directors (to authorize the payment), and an adequate cash balance (to ensure the company has enough liquidity to make the payment).

Analyze the option 'Approval from all common shareholders': This is not a necessary condition for paying a cash dividend. While shareholders may benefit from dividends, the decision to declare and pay dividends is typically made by the board of directors, not by obtaining approval from all shareholders.

Compare the options provided: Identify which conditions are necessary (sufficient retained earnings, formal declaration by the board, adequate cash balance) and which one is not necessary (approval from all common shareholders).

Conclude that the correct answer is 'Approval from all common shareholders,' as it is not required for a corporation to pay a cash dividend.