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    Assessing the Motives of Using Payments of Dividends

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    Could you please explain whether the payment of dividends can mislead people to think that the company is in good financial health?

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    https://brainmass.com/business/accounting-for-corporations/assessing-motives-payments-dividends-523485

    Solution Preview

    The payment of dividends can easily lead investors or potential investors to believe that a company is profitable, which is oftentimes very misleading. When a company pays dividends, they do so from remaining profits. When there is a profit situation, the board of directors can declare a dividend. A company doesn't have to pay dividends, but most choose to ...

    Solution Summary

    This solution explains if and why a company's declaration and subsequent payment of dividends can mislead people to think that the company is in good financial health. Response includes 1 reference.

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