Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A) Salaries to partners and interest on partners' capital are expenses of the partnership.
• B) Salaries to partners are expenses of the partnership but not interest on partners' capital.
• C) Interest on partners' capital is an expense of the partnership but not salaries to partners.
• D) Neither salaries to partners nor interest on partners' capital are expenses of the partnership.

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Definitions:

Residual Dividend Policy

A financial policy regarding dividend payments where dividends are only issued after all project and operational expenses have been met and all planned investments are funded.

Optimal Capital Budget

The set of projects that maximizes the value of the firm.

Retained Earnings

The portion of a company’s net profits which is kept within the company instead of being paid out to the shareholders as dividends.

Dividend Reinvestment Plans

Programs that allow investors to automatically reinvest their cash dividends into additional shares or fractional shares of the underlying stock.