alleryStart learning →From which pool is a company normally barred from paying a dividend?
AIts current profit
BIts past reserves
CIts share capital
DIts free surplus
Answer & Solution
Correct answer: C. Its share capital
Dividends must come from profits, so paying them out of capital is usually prohibited.
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Related questions
Which limits can restrict how much a firm may distribute as dividend?Why might management avoid changing dividend policy abruptly?Which alternative to cash dividends may a firm choose when surplus cash exists?Which type of shareholder usually prefers earnings to be retained?With no NPV-positive projects and surplus cash, what should management do?Management knowing more than the market is called what?If dividends bear higher tax than gains, raising them does what to value?Per the Modigliani-Miller theorem, dividend policy has what effect on firm value?