Which of the Following Statements About Retained Profits Is True

question 19

Multiple Choice

Which of the following statements about retained profits is true?

• A) Retained profits is the sum of past net profits/losses minus dividends declared.
• B) Retained profits indicates the total profits earned by a company since its inception.
• C) If a company does not pay a dividend,it cannot decrease.
• D) Retained profits is the current year's profit.

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Definitions:

Contribution Margin Ratio

The ratio that represents what percentage of sales contributes to the covering of fixed costs, calculated by subtracting variable costs from sales revenue and dividing the result by sales revenue.

Operating Income

Earnings from a company's core business operations, excluding revenue and expenses from non-operating activities like investments.

Variable Costs

Costs that vary depending on a company’s level of activity.

Break-even Sales

The amount of revenue from sales needed to cover a company's fixed and variable costs, resulting in zero net income.