Question

When a dividend is declared:

A. assets decrease.
B. liabilities increase.
C. stockholders' equity increases.
D. All of these answer choices are correct.

Answer 1

When a dividend is declared, stockholders' equity increases.

Step-by-step explanation:

When a dividend is declared, stockholders' equity increases. A dividend is a direct payment made by a firm to its shareholders. It represents a distribution of profits to the shareholders, which increases their ownership stake in the company and therefore their stockholders' equity. This payment does not affect the assets or liabilities of the company, so options A and B are incorrect.