Financial deﬁcits are created when:
A)proﬁts and retained earnings are greater than the capital-spending requirement.
B)proﬁts and retained earnings are less than the capital-spending requirement.
C)proﬁts and retained earnings are equal to the capital-spending requirement.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

Financial deficits occur when a company's profits and retained earnings are not enough to cover their capital-spending requirement. Option B correctly identifies this as the cause of financial deficits. Options A and C are incorrect because profits and retained earnings must be less than the capital-spending requirement for a financial deficit to occur. Option D and E are incorrect because they are too broad and do not provide specific information about the cause of financial deficits.

Financial Deﬁcits Are Created When