alleryStart learning →On the declaration date, what does the company record?
AA liability owed
BA cut in capital
CAn operating cost
DA new fixed asset
Answer & Solution
Correct answer: A. A liability owed
Once the board announces the dividend, the company owes the money and books a liability.
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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?