Question

Dividends of $50 are paid to the shareholders of a company. How would this affect the equity of a business

Answer 1

As dividends of $50 are paid to the shareholders of a company it will decrease the stockholder's equity by $50.

What do you mean by dividends?

Dividends refer to the cash payment or reward that a company gives to its common shareholders.

When dividends are paid by the company to its shareholders, it will decrease the shareholder's equity by the total value of all dividends paid.

Thus, dividends of $50 are paid to the shareholders, which will reduce the stockholder's equity by $50.

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