The dividend cannot exceed $1,000,000, the amount of cash available. The dividen

Question

       The dividend cannot exceed $1,000,000, the amount of cash available.
       The dividend cannot exceed $1,700,000, the amount of net working capital.
       The dividend cannot exceed $600,000, the amount of retained earnings.
       The dividend cannot exceed $11,000,000, the amount of total assets.

Salashar, Inc.'s balance sheet is as follows:
Cash $1,000,000 Current Liabilities $1,300,000
Other Current Assets    $2,000,000 Long-term Debt $4,100,000
Long-term Assets $8,000,000 Common Stock $5,000,000
Retained Earnings $   600,000
Total Assets $11,000,000 Total Liab. And Equity    $11,000,000

Salashar decides to pay a dividend. Which of the following statements is MOST correct? (Points : 2)

Explanation / Answer

The dividend cannot exceed $600,000, the amount of retained earnings.

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