Which of the Following Accurately Describes How Earnings from Capital

question 136

Multiple Choice

Which of the following accurately describes how earnings from capital eventually get paid to households?

• A)Households can own a stock of capital and rent it to firms.
• B)Households lend money to firms, who then pay interest to the households.
• C)Households that own stock in firms receive dividends.
• D)All of the above are correct.

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Definitions:

Treasury Stock

Represents shares that were previously issued and outstanding but have been repurchased by the company and are held in its treasury.

Cash Flow Statement

A financial statement that details the inflows and outflows of cash for an entity over a specific period, categorizing them into operations, investing, and financing activities.

Indirect Method

a financial reporting approach used to generate a cash flow statement, where net income is adjusted for changes in assets and liabilities that affect cash but not income.

Financing Activities

Transactions and events where cash flows result from raising capital and repaying debts, critical for understanding the company’s financial health.