Which of the Following Is Correct with Respect to Retained

question 103

Multiple Choice

Which of the following is correct with respect to retained earnings?

• A) Retained earnings represent debt financing.
• B) Retained earnings equal the profits that have been paid out as dividends.
• C) Using retained earnings means that the firm will have to borrow money and pay interest on loans or bonds.
• D) The smaller dividends that may be paid to shareholders as a result of retaining earnings may decrease the demand for, and thus the price of, the company's stock.
• E) None of these are correct.

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