Which Statement Is incorrect

question 23

Multiple Choice

Which statement is incorrect?

• A)Dividends represent a distribution by a corporation to its stockholders.
• B)Dividends are shown on the income statement.
• C)Dividends reduce stockholders' equity, thus the Dividends account increases on the left side.
• D)The Dividends account has a normal debit balance.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its most liquid assets without relying on the sale of inventory.

Debt-to-Equity Ratio

A ratio used to measure the balance between the amount of debt and equity financing a company's assets.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income.