Which of the following is correct with respect to retained earnings?
Retained earnings represent debt financing.
Retained earnings equal the profits that have been paid out as dividends.
Using retained earnings means that the firm will have to borrow money and pay interest on loans or bonds.
The smaller dividends that may be paid to shareholders as a result of retaining earnings may decrease the demand for, and thus the price of, the company's stock.
None of these are correct.

Question

Quizplus · Accepted Answer

The Answer of Which of the following is correct with respect to retained earnings?
Retained earnings represent debt financing.
Retained earnings equal the profits that have been paid out as dividends.
Using retained earnings means that the firm will have to borrow money and pay interest on loans or bonds.
The smaller dividends that may be paid to shareholders as a result of retaining earnings may decrease the demand for, and thus the price of, the company's stock.
None of these are correct.

Which of the Following Is Correct with Respect to Retained