If the Board of Directors Authorizes a $250,000 Restriction of Retained

question 44

Multiple Choice

If the board of directors authorizes a $250,000 restriction of retained earnings for a future plant expansion, the effect of this action is to

• A)decrease total assets and total shareholders' equity.
• B)increase shareholders' equity and to decrease total liabilities.
• C)decrease total retained earnings and increase total liabilities.
• D)reduce the amount of retained earnings available for dividend declarations.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicative of the sensitivity of consumers to price changes.

Demand

The willingness and ability of consumers to purchase goods and services at different prices.

Perfectly Inelastic

A situation where the demand or supply for a good does not change in response to changes in price.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers at various prices.