On the Statement of Retained Earnings

question 25

Multiple Choice

On the statement of retained earnings:

• A) there will be a positive balance in retained earnings if historically expenses have exceeded revenues.
• B) a deficit will result in retained earnings if historically, expenses have exceeded revenues.
• C) any dividends paid during the year will increase retained earnings.
• D) a deficit in retained earnings indicates the company has no cash.

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Definitions:

Asset Turnover

A ratio indicating the effectiveness with which a firm employs its assets to generate sales.

Net Sales

This is the total amount of sales generated by a company after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Total Assets

Total Assets are all the assets a company owns, including cash, inventory, property, and equipment, showcasing the entity’s financial standing.

Inventory Turnover

A ratio showing how many times a company has sold and replaced inventory over a period.