A Business Receives Its Bill for Utilities for the Current

question 151

Multiple Choice

A business receives its bill for utilities for the current month that it plans to pay next month when the payment is due. This transaction causes:

• A)an increase in both assets and owner's equity.
• B)a decrease in both owner's equity and liabilities.
• C)an increase in both assets and liabilities.
• D)an increase in liabilities and a decrease in owner's equity.

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Definitions:

Liquidity

The measure of how easily assets can be converted into cash without affecting their value.

Residual Dividend Policy

A strategy where a company pays dividends from the residual or leftover equity only after all project capital needs are met.

Dividend Payout Ratios

Dividend payout ratios represent the percentage of a company's earnings paid out to shareholders as dividends, indicating how much money a company returns to shareholders versus retaining it.

High-Growth Firms

Companies that show significantly higher rates of growth in revenue or earnings than the average for their industry or the market as a whole.