Which of the Following Is Not True Regarding Firms Use

question 105

Multiple Choice

Which of the following is not true regarding firms use of net assets (assets minus liabilities) ?

• A)Firms use net assets to generate more net assets through the earnings
• B)Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders' equity showing the cause of that increase in net assets.
• C)The retention of net assets generated by earnings generally increases the market price of the firm's common shares.
• D)Some firms pay periodic dividends to the common shareholders out of net assets.
• E)Regardless of whether a firm has more than one class of common stock and their dividend rights differ, each common shareholder always receives the same dividend per share as all other common shareholders.

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Definitions:

Too Much Labor

A situation where there is an excess supply of labor in the market, leading to unemployment or underemployment.

Sherman Act

A landmark federal statute in the field of United States antitrust law passed in 1890 to prohibit monopolies and restrict business practices that reduce market competition.

Monopolization

The process or state by which a single company gains exclusive control over a market, eliminating competition, and often leading to higher prices and reduced quality for consumers.

Tying Agreements

Contracts where the sale of one product (the tying product) is contingent upon the purchase of a second, distinct product (the tied product).