Which of the Following Would Be a Reason for a Company

question 113

Multiple Choice

Which of the following would be a reason for a company to appropriate a portion of retained earnings?

• A) To ensure that the business does not take on too much debt
• B) To increase the amount of earnings available for dividends
• C) To help the company control levels of operating expenses
• D) To limit the amount of retained earnings available for dividends, in order to retain sufficient funds for growth

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Definitions:

Present Value of Annuity

The current worth of a series of future cash flows, adjusted for interest, often used in calculating loans and investments.

Rate of Return on Investment

A measure of the profitability of an investment, calculated as a percentage of the original investment.

Net Present Value

A financial metric used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period of time.

Compound Interest

Interest earnings calculated on the base principal along with any interest that has previously accumulated from past periods on that principal.