Which of the Following Statements Is the Most Common Explanation

question 63

Multiple Choice

Which of the following statements is the most common explanation as to why a company might have a negative amount of total stockholders' equity on its balance sheet?

• A)Its total assets exceed its total liabilities.
• B)Its total revenues are less than its total expenses in the current period.
• C)Its cash is segregated in a separate bank account designated for emergency uses.
• D)It has a negative balance in its Retained Earnings account.

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Definitions:

Average Total Assets

A measure used to calculate the mean value of a company's assets over a specific period, helpful in assessing the company’s asset utilization efficiency.

Return on Assets

An indicator of how profitable a company is relative to its total assets, measuring the efficiency in using assets to generate earnings.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue, indicating the company's profitability.

Average Total Assets

The average value of all assets owned by a company over a specific period, useful in assessing company productivity and investment returns.