Which of the following statements is CORRECT?
A)Since depreciation is a source of funds, the more depreciation a company has, the larger its retained earnings will be, other things held constant.
B)A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments.
C)Common equity includes common stock and retained earnings, less accumulated depreciation.
D)The retained earnings account as shown on the balance sheet shows the amount of cash that is available for paying dividends.
E)If a firm reports a loss on its income statement, then the retained earnings account as shown on the balance sheet will be negative.

Question

Quizplus · Accepted Answer

Retained earnings are profits that a company has earned in the past and has chosen to keep rather than distribute as dividends. It does not necessarily reflect the actual cash balance that the company has on hand. A company can have a large amount of retained earnings on its balance sheet but may still need to borrow cash to make required payments.

Which of the Following Statements Is CORRECT