Question

The purchase of treasury stock usually restricts the amount of retained earnings available for cash dividends.a. Trueb. False

Answer 1

The statement, "The purchase of treasury stock usually restricts the amount of retained earnings available for cash dividends." is true .

Option a

Explanation:

The stock in the bank is the term for originally sold securities that the issuing firm has retained. If a corporation sells some of its released and outstanding securities, the sale drastically alters its retained profits.  

As the balance sheet show all remaining earnings and the equity fund, sums available to pay dividends drop. The price of the stock in treasury should be reduced by the retained revenues, which reduce the amounts that the business can dividend to shareholders.

Sometimes a business needs the share-earnings ratio to be improved. If a company bought out many of its own shares, it reduces the number of released and outstanding activities raises the earnings per stake in the company and makes the assets more appealing for buyers.