A firm has a net income (after-tax profit)of $500,000 and pays dividends of $150,000.Which of the following statements is true?

Question

Quizplus · Accepted Answer

The net income of $500,000 increases the retained earnings balance, and the payment of $150,000 in dividends decreases the retained earnings balance. Therefore, the retained earnings balance increases by $350,000 ($500,000 - $150,000). There is no information to suggest that cash decreased or long-term debt increased.

A Firm Has a Net Income (After-Tax Profit)of $500,000 and Pays