Retained Earnings Are Occasionally Restricted

question 154

Multiple Choice

Retained earnings are occasionally restricted

• A) to set aside cash for dividends.
• B) to keep the legal capital associated with paid-in capital intact.
• C) due to contractual loan restrictions.
• D) if preferred dividends are in arrears.

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Definitions:

Current Liabilities

Short-term financial obligations that a company owes and are due within one year.

Total Liabilities

The sum of all financial obligations or debts that a company owes to outside parties.

Acid-Test Ratio

A financial metric used to determine a company’s ability to pay off its short-term liabilities with its most liquid assets, excluding inventory.

Marketable Securities

Financial instruments that can be quickly converted into cash at a reasonable price.