[Solved] Capital profits

Capital profits

a) Can be paid by way of dividends

b) Cannot paid by way of dividends

c) Can be paid by way of dividend under certain conditions

d) None of the above

Answer: (c) Capital profits can be paid by way of dividends under certain conditions. The distribution of dividends is nothing but the distribution of profits to the shareholders. The company may utilize its reserves and retained earnings to do so. However, there are certain limitations to utilizing Capital profits for dividend distribution; which can be used only if all the given conditions are satisfied.

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