Which of the Following Statements Best Describes Retained Earnings

question 26

Multiple Choice

Which of the following statements best describes retained earnings?

• 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) The retained earnings account as shown on the balance sheet shows the amount of cash that is available for paying dividends.
• D) 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:

Chapter 7

A provision of the bankruptcy code in the United States that provides for "liquidation," whereby a debtor's non-exempt assets are sold and the proceeds are used to pay creditors.

Automatic Stay

A self-operating postponement of collection proceedings against a debtor who has filed a petition for bankruptcy.

Collection Proceedings

The legal process initiated by creditors to recover money owed by a debtor.

Means Test

Three steps used to qualify someone for Chapter 7 bankruptcy.