Please Refer to the Partial Balance Sheet Data Provided Below

question 38

Multiple Choice

Please refer to the partial balance sheet data provided below:

Which of the following is a valid conclusion from the above data?

• A) The company relied heavily on retained earnings to finance asset growth in 2017.
• B) Current asset and current liability data suggest a liquidity problem in 2017.
• C) The company shifted towards greater debt financing and less equity financing over the two year period.
• D) The balance in Retained earnings declined over a two year period.

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Definitions:

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but kept back to reinvest in the business.

DCF Approach

The Discounted Cash Flow (DCF) approach involves estimating the present value of an investment based on its expected future cash flows, adjusting for the cost of capital.

Cost of Equity

The rate of return a company is expected to pay to its shareholders to compensate them for the risk of investing in the company.

Retained Earnings

Profits that a company has chosen to reinvest in the business rather than distribute to shareholders as dividends, accumulated over time.