What Is the Relationship Between Current Liabilities and a Company's

question 39

Multiple Choice

What is the relationship between current liabilities and a company's operating cycle?

• A) Liquidation of current liabilities is reasonably expected within the company's operating cycle (or one year if less).
• B) Current liabilities are the result of operating transactions.
• C) Current liabilities can't exceed the amount incurred in one operating cycle.
• D) There is no relationship between the two.

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Definitions:

Shareholders' Equity

The residual interest in the assets of a company after subtracting liabilities, representing ownership equity.

Total Assets

The sum of all current and noncurrent assets owned by a company, reflecting its overall value.

Retained Earnings

The portion of a company's net income that is held or retained for reinvestment in the business or to pay debt, rather than being paid out as dividends.

Stock Dividend

A stock dividend is a payment made by a corporation to its shareholders in the form of additional shares, rather than paying dividends in cash, indicating investment back into the company.