Which of the Following Statements Is CORRECT

question 6

Multiple Choice

Which of the following statements is CORRECT?

• A) If a company pays more in dividends than it generates in net income,its retained earnings as reported on the balance sheet will decline from the previous year's balance.
• B) Dividends paid reduce the net income that is reported on a company's income statement.
• C) If a company uses some of its bank deposits to buy short-term,highly liquid marketable securities,this will cause a decline in its current assets as shown on the balance sheet.
• D) If a company issues new long-term bonds during the current year,this will increase its reported current liabilities at the end of the year.
• E) Accounts receivable are reported as a current liability on the balance sheet.

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Definitions:

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating the profitability of a company.

Return On Sales

A ratio used to evaluate a company's operational efficiency, calculated by dividing operating profit by sales revenue.

Accrual Accounting

A financial recording approach that documents incomes and expenditures at the time they happen, irrespective of the actual cash flow.

Accrued Revenues

Income that has been earned but not yet received, recorded as an asset on the balance sheet to reflect sales that have taken place.