Which of the following statements concerning net income is MOST correct?
A) Net income represents cash available to pay dividends.
B) Net income represents sales minus operating expenses at a specific point in time.
C) Negative net income reduces a company's cash balance.
D) Net income represents income that may be reinvested in the firm or distributed to its owners.

Question

Quizplus · Accepted Answer

Net income represents the profit earned by the company after subtracting all expenses, including taxes. This profit can either be reinvested in the business for future growth or distributed to shareholders in the form of dividends. Therefore, option D is the correct statement as net income represents income that may be reinvested in the firm or distributed to its owners. Option A is incorrect as not all net income is necessarily used to pay dividends. Option B is incorrect as net income is the profit earned over a period of time, not at a specific point in time. Option C is incorrect as negative net income reduces retained earnings, but it may not necessarily reduce the cash balance immediately.

Which of the Following Statements Concerning Net Income Is MOST