In Which of the Following Situations Is a Reduction in Earnings

question 8

Multiple Choice

In which of the following situations is a reduction in earnings most likely to be followed by a reduction in dividends?

• A) Following a scrip dividend issue in the previous year
• B) When the earnings fall is a result of poor management
• C) When the earnings fall is thought likely to persist for a long time
• D) When the earnings fall is thought likely to be short term

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Definitions:

Cash Inflows

Money or equivalent value received by an entity, typically as a result of its business operations, investments, or financing activities.

Financial Statements

Records that outline the financial activities and condition of a business, government, or individual. These commonly include the balance sheet, income statement, and statement of cash flows.

Certificates of Deposit

Fixed-term financial instruments issued by banks that pay interest until maturity, when they can be redeemed for the original amount plus accrued interest.

Petty Cash

A small amount of cash on hand used for covering minor expenses in a business.