Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A)Since depreciation is a source of funds, the more depreciation a company has, the larger its retained earnings will be, other things held constant.
• B)A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments.
• C)Common equity includes common stock and retained earnings, less accumulated depreciation.
• D)The retained earnings account as shown on the balance sheet shows the amount of cash that is available for paying dividends.
• E)If a firm reports a loss on its income statement, then the retained earnings account as shown on the balance sheet will be negative.

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Definitions:

Law Of Supply

An increase in the price of a product will increase the quantity of it supplied; and conversely for a decrease in price.

Quantity Supplied

The quantity of a product that suppliers are ready and capable of offering for sale at a certain price during a defined timeframe.

Equilibrium Quantity

The quantity of goods or services supplied that is exactly equal to the quantity demanded at the market equilibrium price.

Supply Decrease

A reduction in the quantity of a good or service that producers are willing and able to offer at any given price.