dividends vs dividends question
Hi guys. I've got a question and can not find any comprehensive answer.
So the question is: how do dividends to common shareholders reflect on 3 statements and the same regarding preferred dividends.
I assume that
1) Dividends to common shareholders
IS
doesn't reflect any
BS
decline in retained earnings and in cash
CFS
dividends payment in CFF
2) Dividends to prefs
IS
dividends paid (assumption paid=declared) reduce net income
BS
decline in retained earnings and in cash
CFS
pref. dividends payment in CFF
I would be grateful if you could help me to figure it out.
From my understanding, the treatment of both dividends should have the same effect on the 3 financial statements (albeit different line item names).
IS No effect
CFS cash outflow from financing of dividend amount
BS Cash down by dividend Retained earnings down by dividend Should balance
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