Final answer:
Dividends have no effect on total owners' equity because they are simply a distribution of profits.
Step-by-step explanation:
A dividend is a direct payment from a firm to its shareholders. When a company pays a dividend, it distributes a portion of its profits to its shareholders as a reward for their investment. Dividends are typically paid in the form of cash, but they can also be paid in the form of additional shares of stock or other assets.
Dividends have no effect on total owners' equity because they are simply a distribution of profits. Owners' equity represents the residual interest in the assets of a company after deducting liabilities. Dividends reduce retained earnings, a component of owners' equity, but they do not affect the overall value of owners' equity.
For example, if a company has owners' equity of $1 million and pays a dividend of $100,000, its owners' equity will still be $1 million after the dividend payment.