Could a company issue dividends if it is making accumulated losses in its retained earnings account?
If it’s just the current year that made a loss, but the retained earnings account is still in credit, then you can still pay a dividend. However you cannot pay a dividend if the accumulated losses have more than wiped out previous profits such that the retained earnings account is in deficit (i.e. in debit). If you do, you’re paying dividends out of capital. “It is actually illegal for a company, under corporate law, to pay out more than its retained earnings and have a shareholder’s deficit.” – see attached link.
