Undistributed Profits of a Firm Are

question 89

Multiple Choice

Undistributed profits of a firm are

• A) profits that are available to be reinvested in the firm's operations.
• B) earnings that are used to cover interest expenses of the firm.
• C) earnings that are used to pay dividends to shareholders.
• D) profits that are paid out to owners of the firm.
• E) earnings that are used to cover the costs of production.

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Definitions:

Required Rate of Return

The minimum expected return by an investor for investing in a risky asset, considering the risk involved.

FCFF

Free Cash Flow to Firm; a measure of financial performance that expresses the net amount of cash that is generated for the firm, inclusive of financing and debt service.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes the effect of financial and tax decisions.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the decrease in value due to use and age.