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ave sufficient funds to pay dividends?

ave sufficient funds to pay dividends?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company had the following items on its statement of financial position: Cash, $110,000; Inventory, $200,000; Property, plant and equipment, $590,000; Current liabilities, $150,000; Long-term liabilities, $240,000; Share capital, $400,000; and Retained earnings, $100,000. Does the company have sufficient funds to pay dividends? Yes. Their working capital of $160,000 would cover a dividend payment of $100,000. O No. If they declare dividends, they will not have sufficient funds available to settle their current liabilities. O Yes. They have retained earnings of $100,000 and $110,000 in cash to pay dividends. O No. Their share capital has to be larger to support $100,000 in dividends.
Transcribed Image Text:A company had the following items on its statement of financial position: Cash, $110,000; Inventory, $200,000; Property, plant and equipment, $590,000; Current liabilities, $150,000; Long-term liabilities, $240,000; Share capital, $400,000; and Retained earnings, $100,000. Does the company have sufficient funds to pay dividends? Yes. Their working capital of $160,000 would cover a dividend payment of $100,000. O No. If they declare dividends, they will not have sufficient funds available to settle their current liabilities. O Yes. They have retained earnings of $100,000 and $110,000 in cash to pay dividends. O No. Their share capital has to be larger to support $100,000 in dividends.
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