If Retained Earnings Decreased During the Year, and No Dividends

question 103

Multiple Choice

If retained earnings decreased during the year, and no dividends were paid, which of the following must be true?

• A) Expenses for the year exceeded revenues.
• B) The company did not have enough cash to pay its expenses.
• C) Total stockholders' equity increased.
• D) Liabilities increased during the year.

---

Definitions:

Variable Costs

Costs that change in proportion to the level of output or activity in a business.

Snow-clearing

The process of removing snow from surfaces like roads and walkways to ensure safe passage and transportation.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price-taking behavior.

Optimal Output Rule

The principle that profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost.