If a Corporation Earns a Profit, How Do Owners of the Firm

question 221

Multiple Choice

If a corporation earns a profit, how do owners of the firm share in the profit?

• A)through coupon payments on that firm's bonds
• B)through dividend payments on shares of that firm's stock
• C)by selling any bonds or stocks owned and realizing a capital gain
• D)by raising the interest rate on bonds

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Definitions:

Deferred Exploration Expenditure

Costs incurred in exploratory activities in mining and oil and gas companies that are capitalized as an asset on the balance sheet until the resources are found to be economically viable.

Sundry Assets

Miscellaneous assets on a company’s balance sheet that do not neatly fit into other asset categories, often of minor value.

Sundry Liabilities

Generally refers to a category of various minor or infrequent liabilities that a company might incur, which are too small or irregular to warrant individual classification.

One-Line Method

An accounting method used in consolidated financial statements where the investment in a subsidiary is presented as a single line item, reflecting the net assets of the subsidiary.