Ask Question
24 June, 08:51

A corporation with both preferred stock and common stock outstanding has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of $150,000 each quarter and a common dividend of $90,000 each quarter, the board of directors declares dividends only on the preferred stock. Suggest possible reasons for passing the dividends on the common stock.

+3
Answers (1)
  1. 24 June, 09:40
    0
    Profit re-investments, purchase of another company, financial troubles

    Explanation:

    The first reasons could be that the company wants to reinvest its profit after it pays out dividends on preferred stocks or in other words if it wants to finance its future growth. Another reasons could be that the company has decided to withhold some of its earnings for future acquisitions. Third possible reason could be that the company wants to defer the payments on common stock for some time.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A corporation with both preferred stock and common stock outstanding has a substantial credit balance in its retained earnings account at ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers