Assuming That a Company Has a Policy of Paying Out

question 230

Multiple Choice

Assuming that a company has a policy of paying out a constant fraction of net income in the form of a cash dividends, calculate the addition to retained earnings given the following information: cash
Dividends = $3,000; net income = $15,000.

• A) $10,000
• B) $12,000
• C) $14,000
• D) $16,000
• E) $18,000

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Definitions:

Manufacturing Department

A specialized division within a company that is focused on the production of goods.

Payroll Accounting

The process of recording and managing all financial transactions related to employee compensation.

Return On Investment

A profitability ratio measuring the gain or loss generated on an investment relative to the amount invested.

Invested Assets

Refers to resources allocated by individuals or entities into various types of investment vehicles aiming for future returns.