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The board of directors of Testa Incorporated has decided that they would like to declare a $400,000 cash dividend at some point in the near future. The company currently has Retained Earnings of $2,419,000 and a Cash balance of $827,000. They also have current liabilities totaling $436,000. What is missing in order for Testa to be able to pay a cash dividend

Respuesta :

Answer:

Approval and the declaration by the board of directors

Explanation:

The three key requirement for a company to pay dividends are adequate retained earnings , adequate cash and the declaration and approval of the board of directors.

Looking at the provided information for Tesla incorporation ,what is missing is the Approval of the board through declaration of payment.

It was still an intention , so the declaration is still necessary for payment. Other conditions like adequate cash balance and retained earning are are already met

Parrain

Tesla is unable to pay a cash dividend because they have the serious problem of not having B : a healthy cash reserve

In order to pay dividends, a company needs to have a healthy cash reserve from which the dividends can be paid.

Tesla cash reserve:

= Cash balance - Current liabilities

= 827,000 - 436,000

= $391,000

This amount is less than the dividend amount of $400,000 which means that Tesla does not have a healthy cash reserve to pay dividends.

Options for this question include:

A : approval of the executives

B : a healthy cash reserve

C : approval of the investors

D : adequate Retained Earnings

Find out more at https://brainly.com/question/11522226.

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