The Statement Concerning the Reserves Component of Equity That Is

question 6

Multiple Choice

The statement concerning the reserves component of equity that is not correct is:

• A) Reserves represent cash.
• B) The higher the dividend paid by the company, the lower the reserves.
• C) Retained earnings and reserves are often classified under the general heading of reserves.
• D) Many reserves arise as transfers from retained earnings.

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Definitions:

Fixed Assets

Long-term tangible assets that are used in the operations of a business, such as machinery, buildings, and equipment, and are not expected to be converted into cash in the current or upcoming fiscal year.

Long-term Bank Loan

A loan provided by a banking institution with a repayment period extending beyond one year, typically used for financing significant business investments or acquisitions.

Use of Cash

Use of Cash refers to how a business or individual utilizes their available cash resources, including operating expenses, investments, and financing activities.

Inventory

The total value of a company's goods that are ready for sale, in the process of being produced, or used as raw materials.