Tulips Inc. saw an increase in profits last year following which the management decided to reinvest earnings. These retained earnings will be used to:
A) meet the company's longterm financial needs.
B) meet the company's shortterm financial needs.
C) pay the owners a dividend.
D) increase the liquid assets of the company.

Question

Tulips Inc. saw an increase in profits last year following which the management decided to reinvest earnings. These retained earnings will be used to:
A) meet the company's long­term financial needs.
B) meet the company's short­term financial needs.
C) pay the owners a dividend.
D) increase the liquid assets of the company.

Quizplus · Accepted Answer

Since the earnings are being reinvested, it means the management has decided to use it for the long-term growth and expansion of the company. Hence, the retained earnings will be used to meet the company's long-term financial needs.