Which of the following is not a legal restriction related to profit distributions by a corporation?

a. The amount distributed to owners must be in compliance with the state laws governing

corporations.

b. The amount distributed in any one year can never exceed the net income reported for

that year.

c. Profit distributions must be formally approved by the board of directors.

d. Dividends must be in full agreement with the capital stock contracts as to preferences

and participation.

Question

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19 January, 17:24

Which of the following is not a legal restriction related to profit distributions by a corporation?

a. The amount distributed to owners must be in compliance with the state laws governing

corporations.

b. The amount distributed in any one year can never exceed the net income reported for

that year.

c. Profit distributions must be formally approved by the board of directors.

d. Dividends must be in full agreement with the capital stock contracts as to preferences

and participation.

+2

Answers (1)

Know the Answer?

Maddox Perry · Answer 1

b. The amount distributed in any one year can never exceed the net income reported for that year.

Explanation:

If the companys had 100,000 net income per year during 10 year

His retained earnings amount will be 1,000,000

Then, suppose next year income is also 100,000

The company is not doing anything wrong if it distribute dividends for 400,000 as their retained earnings can afford this dividends