Which of the following statements about Retained Earnings is correct?
A)Retained Earnings represents cash available to pay dividends to stockholders.
B)Retained Earnings cannot be restricted by loan covenants.
C)Retained Earnings generally consists of cumulative net income less any net losses and dividends since inception.
D)Retained Earnings is reduced by the par value of the common stock that is issued.

Question

Quizplus · Accepted Answer

Retained Earnings reports the cumulative amount of net income earned by the company less the cumulative amount of dividends since the corporation was first organized.Retained Earnings represents earned capital (rather than cash).A company may be restricted by clauses in its loan agreements (called loan covenants)that require a minimum balance in Retained Earnings.Transactions involving the issuance of common stock do not affect Retained Earnings.

Which of the Following Statements About Retained Earnings Is Correct