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.

Recognize the significance of financial ratios and how they are used to evaluate a firm's financial health.

Understand how business activities affect operating cash flow.

Appreciate the role of financial decision-making in enhancing shareholder value.

Understand the concept of realized capital gains and their calculation.

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Definitions:

Unused Capacity

The available production or service capacity that is not being used, often considered when planning production schedules and resource allocation.

Period Expense

Expenses that are not directly tied to the production process and are charged to the periods in which they are incurred.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual products or job orders, based on a related activity (e.g., machine hours or labor hours).

Predetermined Overhead Rate

A predetermined rate for allocating manufacturing overhead to products or job orders, established prior to the period by forecasting both overhead expenses and activity volumes.