Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?

• A) Since depreciation increases the firm's net cash provided by operating activities,the more depreciation a company has,the larger its retained earnings will be,other things held constant.
• B) A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments.
• C) Common equity includes common stock and retained earnings,less accumulated depreciation.
• D) The retained earnings account as reported on the balance sheet shows the amount of cash that is available for paying dividends.
• E) If a firm reports a loss on its income statement,then the retained earnings account as shown on the balance sheet will be negative.

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Definitions:

Net Income

is the total earnings of a company after all expenses and taxes have been subtracted from total revenue; a key indicator of financial health.

Accrual Accounting

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Current Operating Liabilities

Short-term liabilities that are incurred as part of the normal operations of a business, due within a fiscal year.

Decreases

A reduction in quantity, size, or overall value of an asset, revenue, or other financial metric.