Which of the Following Statements Is CORRECT

question 35

Multiple Choice

Which of the following statements is CORRECT?

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

---

Definitions:

Assemblers

Individuals or machines that put together components to create a finished product.

Partnership

A legal form of business operation between two or more individuals who share management and profits.

Ratio

A mathematical expression that compares two quantities and shows the relative size of one quantity to the other.

Original Ratio

Original ratio refers to the initial proportional relationship between two or more quantities before any changes are made.