The Connecting Link Between the Balance Sheet and the Income

question 14

Multiple Choice

The connecting link between the balance sheet and the income statement is:

• A) dividends paid to shareholders.
• B) the opening balance of retained profits.
• C) total shareholders' equity.
• D) net profit after tax.

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Definitions:

Net Income

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

Dividend Payout Ratio

A financial metric that calculates the percentage of net income distributed to shareholders in the form of dividends.

Total Stockholders' Equity

The total net worth of a company according to its balance sheet, calculated as total assets minus total liabilities.

Common Stock

A type of equity security representing ownership in a corporation, with holders typically having voting rights and receiving dividends.