Failure to Record the Declaration and Distribution of a Share

question 50

Multiple Choice

Failure to record the declaration and distribution of a share dividend would

• A)Have no effect on total equity
• B)Cause the outstanding shares to exceed the equity
• C)Cause an understatement of equity
• D)Cause an overstatement of equity
• E)Cause the balance sheet to be out of balance

Interpret key financial ratios, including profit margin, fixed asset turnover, and total asset turnover.

Understand the impact of changes in accounts receivable, inventory, and fixed assets on cash flow and how this is reflected in the statement of cash flows.

Evaluate the use of industry benchmark information for financial analysis.

Recognize the significance of changes in financial ratios over time and their impact on company valuation.

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Definitions:

Consideration

The value (such as money, services, or goods) exchanged between parties in a contract, making the agreement legally binding.

Apparent Authority

The impression given by a principal to a third party that an agent has the authority to act on the principal’s behalf.

Agency Relationship

A legal relationship wherein one party, the agent, is authorized to act on behalf of another party, the principal, in business transactions.

Consideration

In contract law, consideration refers to something of value that is exchanged between parties as part of an agreement, making the contract legally binding.