Which of the Following Statements Regarding the Retained Earnings Account

question 26

Multiple Choice

Which of the following statements regarding the retained earnings account is not true?

• A)It normally has a credit balance.
• B)Its balance is increased by revenues.
• C)Its balance is decreased by expenses.
• D)Its balance is increased by the declaration of dividends.

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Definitions:

Capital Budget

The budget allocated for spending on major long-term investments or projects of a company.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operational costs, from its revenues.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis.

Gordon Model

A mathematical model for valuing stock based on an assumed constant growth rate into the indefinite future.