If the Retained Earnings Account Increases from the Beginning of the Year

question 64

Multiple Choice

If the retained earnings account increases from the beginning of the year to the end of the year, then

• A)net income is less than dividends.
• B)a net loss is less than dividends.
• C)additional investments are less than net losses.
• D)net income is greater than dividends.

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Definitions:

Fixed Costs

Expenses that do not change in relation to the volume of production or sales, such as rent, salaries, and insurance.

Operating Leverage

A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.

Highly Automated Industries

Sectors where machines and advanced technologies preponderantly perform production and operational processes, reducing human intervention.

Break-even Point

The point at which total revenues equal total costs and expenses, leaving no net loss or gain.