The Scott Co

Multiple Choice

The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company:

A) Must always show a current liability of $1,000 for dividends payable.
B) Is obligated to continue paying $1 per share per year.
C) Will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis.
D) Has a liability which must be paid at a later date should the company miss paying an annual dividend payment.
E) Must still declare each dividend before it becomes an actual company liability.