Answer to Question #22625 in Finance for Jefferson

Question

Dividends paid reduce the net income that is reported on a company’s income statement.
b. If a company uses some of its bank deposits to buy short-term, highly liquid marketable
securities, this will cause a decline in its current assets as shown on the balance sheet.
c. If a company issues new long-term bonds during the current year, this will increase its
reported current liabilities at the end of the year.
d. Accounts receivable are reported as a current liability on the balance sheet.
e. If a company pays more in dividends than it generates in net income, its retained.
earnings as reported on the balance sheet will decline from the previous year's balance.

Answer 1

If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance.
Company pays more in dividends than it generates in net income, so it pays more than it gets and company need additional money, which it can take out of company's previous incomes that lead to declination of its retained earnings in comparison with previous year's balance.