Question

Cash dividends are paid out of:

1-residual cash flows.
2-liquidated assets.
3-long-term debt.
all of the above.

Answer 1

Cash dividends are primarily paid out of residual cash flows, which are a company's net income after expenses and reinvestments. Liquidated assets and long-term debt are not typical sources for dividend payments.

Step-by-step explanation:

Cash dividends are typically paid out of residual cash flows, which represent the net income a company has available after all operating expenses, taxes, and reinvestment activities. Dividends typically come from profits that a company decides not to reinvest back into the business. Therefore, while liquidated assets or long-term debt could theoretically be sources of dividend payments, they are not the typical sources. Issuing dividends is a way for companies to distribute profits directly to shareholders, and the amount received is proportional to the number of shares owned.