If a firm incurs a loss during a particular year, or if the firm had positive net income but paid out dividends more than the net income, its retained earnings for that year will most likely be
A) a large positive number.
B) a low positive number.
C) zero.
D) a negative number.
E) Can not be determined from this information

Question

Quizplus · Accepted Answer

If a firm incurs a loss or pays out more dividends than its net income, it will have negative retained earnings for that year. This means that the firm has depleted the accumulated earnings from prior years, resulting in a negative balance.

If a Firm Incurs a Loss During a Particular Year