If a Corporation Distributes Cash to Its Shareholders, Then

question 206

Multiple Choice

If a corporation distributes cash to its shareholders, then

• A) there has been a violation of accounting principles.
• B) equity will increase.
• C) equity will decrease.
• D) there will be a new liability showing the shareholders owe money to the business.

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Definitions:

Cost Savings

Reductions in costs achieved through methods such as efficiency improvements, negotiations for better prices, or elimination of unnecessary expenses.

Product Line

A series of related products offered by a company, often serving a common market or purpose.

Net Income

The amount of earnings left after all expenses and taxes have been deducted from total revenue.

Variable Expenses

Costs that vary directly with the level of production or sales volume.