Matt has been told by his instructor that dividends reduce retained earnings (and therefore stockholders equity). However,

Question:

Matt has been told by his instructor that dividends reduce retained earnings (and therefore stockholders’ equity). However, since he knows that stockholders are receiving the Matt doesn’t understand how paying a would decrease stockholders’ equity. Explain this to Matt.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...