Which Statement Is Correct for a Firm That Forecasts Net

question 84

Multiple Choice

Which statement is correct for a firm that forecasts net income of $200,000 and a reduction in retained earnings of $50,000?

• A)Dividends will total $150,000
• B)The plowback ratio is 25%
• C)The payout ratio exceeds 1.0
• D)This combination of account changes cannot occur

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Definitions:

Cash Increase

A rise in the amount of cash and cash equivalents held by a business.

Accounts Payable

Liabilities of a business representing money owed to creditors for goods and services purchased on credit.

Source of Cash

Any activity or operation that brings money into a business, contributing to its cash flow.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.