Question

When does a dividend become a liability to a corporation?

multiple choice question.
A. on the ex-dividend date
B. at the end of each quarter
C. when it is declared by the board of directors
D. on the last day of the fiscal year

Answer 1

A dividend becomes a liability to a corporation when it is declared by the board of directors. The correct option is option C.

What is a Dividend?

A dividend is a distribution of a portion of a company's earnings or profits to its shareholders. It represents a way for a corporation to share its financial success with its owners, who are the shareholders or stockholders of the company.

A dividend becomes a liability to a corporation when it is declared by the board of directors. The declaration of a dividend represents a legal obligation of the corporation to distribute a portion of its earnings or profits to its shareholders. At this point, the corporation incurs a liability on its balance sheet, as it is obligated to make the dividend payment to the shareholders on a specified date in the future.