From the following statements, select the one that describes the effect of dividends on equity.

Business

1 answer:

Firdavs [7]3 years ago

4 0

Answer: d) Dividends cause equity to decrease.

Explanation:

Dividends are payments to shareholders as a way of sharing the profit that the company made with its owners. Net profit is added to the Equity of company.

In other words, dividends cause equity to decrease because they are taken from Retained Earnings (net income) which are added to Equity. By reducing the amount of Retained earnings available therefore, dividends are reducing Equity.

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Following are the solution to this question:

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Applied to fixed overhead