Which of the Following Statements Is TRUE

question 46

Multiple Choice

Which of the following statements is TRUE?

• A)The only cash flows that an investor will receive until he or she sells their shares will be the dividends.
• B)A firm's residual earnings technically belong to the preferred shareholders.
• C)Corporations generally pay all their earnings as dividends.
• D)Corporations typically reinvest none of their earnings to enhance future earnings.

---

Definitions:

Allowance Method

A method used in accounting to estimate and account for bad debts, representing the amount of accounts receivable that may not be collected.

Allowance for Doubtful Accounts

A contra asset account that represents the estimated portion of accounts receivable that may not be collectible.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts receivable and adjust the amount of accounts receivable reported on the balance sheet.

Accounts Receivable

Money owed to a company by its customers for sales or services on credit, considered a current asset on the balance sheet.