Retained Earnings Are Occasionally Restricted

question 154

Multiple Choice

Retained earnings are occasionally restricted

• A) to set aside cash for dividends.
• B) to keep the legal capital associated with paid-in capital intact.
• C) due to contractual loan restrictions.
• D) if preferred dividends are in arrears.

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Definitions:

Market Value

The existing rate at which an asset or service can be traded in the market.

Incremental Value

The additional or extra value created by undertaking a new project or activity compared to not doing it, often considered in decision-making processes.

All-Equity Firms

Companies that finance their operations without any debt, relying solely on shareholder equity.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including those held by institutional investors and restricted shares held by insiders and company officers.