MCQs on Retained Earnings

Retained Earnings are a significant idea in bookkeeping. The term alludes to the chronicled benefits procured by an organization, less any profits it paid before. Retained catches the way that because those profits were not delivered out to investors as profits they were rather held by the organization. Consequently, held income declines when an organization either loses cash or delivers profits, and increment when new benefits are made.

Retained Earnings MCQs: This section contains multiple-choice questions and answers on Retained Earnings. It will help the students to prepare well for their exams and to test their skills on Retained Earnings.

List of Retained Earnings MCQs

1. Retained Earnings are?

  1. It is not necessary when determining assignments.
  2. Also known as corporate salaries after paying dividends.
  3. An indication of the financial position of the company.
  4. Similar to bank money.

Answer: B) Also known as corporate salaries after paying dividends

Explanation:

Retained earnings are known as corporate salaries after paying dividends. Retained earnings are the profits the company has achieved so far, under any profits or other distributions paid to investors. This amount is adjusted whenever the accounting records are included which contributes to the accounting income or expense.

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2. In a balance sheet, total savings and general stock are known as:

  1. Normal perpetuity
  2. Equal equity
  3. Appropriate equity
  4. Preferred equity

Answer: B) Equal equity

Explanation:

Total savings and general stock are known as Equal Equity. Equity can be found on a company balance sheet and is one of the most common data analysts used by analysts to assess a company's financial position.

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3. Which of the following is true?

  1. Saved Benefits are cheaper than External Equity
  2. Refunds are more expensive than External Equity
  3. Equity Retained earnings are free
  4. External Equity is cheaper than Internal Equity

Answer: A) Saved Benefits are cheaper than External Equity

Explanation:

Equity funding can be made in two ways, by using savings or by issuing additional dividends. The cost of equality is the same in both cases. The only difference is the floating costs. There are no floating costs in the event of savings but there will be floating costs when funds are received through a new stock exchange. Therefore, saved benefits are cheaper than External Equity.

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4. This is considered to be the most expensive source of funding,

  1. Retained Earnings
  2. New Debts
  3. New Popular Assignments
  4. New Equity Shares

Answer: D) New Equity Shares

Explanation:

New Equity Shares is considered the most expensive fund source compared to popular stocks with a fixed share of profits.

Companies can use a variety of sources of revenue for their business. Popular stocks and common stocks are the most common source of income. Choosing a specific source of funding depends on the risk involved and the expected level of return required by investors. Therefore, one needs to do a risk assessment before finalizing any potential source of capital expenditure.

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5. The dividend-payout rate is equal to?

  1. Dividends per share divided by the current price per share.
  2. Dividends per share are divided by the value of each share.
  3. Dividend per share divided by profit per share.
  4. Dividend benefit and profit margin.

Answer: C) Dividend per share divided by profit per share

Explanation:

The dividend-payout rate is equal to dividend per share divided by profit per share.

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6. In a for-profit company, which of the following statements could be true?

  1. Profit reserves at the end of the year will be greater than the profits returned at the beginning of the year.
  2. Profits kept at the end of the year will be greater than shareholders' shares.
  3. The annual profit will be greater than the total profit.
  4. Operating income will be less than annual income.

Answer: A) Profit reserves at the end of the year will be greater than the profits returned at the beginning of the year

Explanation:

At the end of each calculation period, the retained profits are reported on the balance sheet as revenue accumulated from the previous year (including current year earnings), excluding dividends paid to shareholders. In the next calculation cycle, the last RE balance from the previous accounting period will now be the first balance of earnings.

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7. A financial document showing the success or failure of a business transaction over a period of time known as?

  1. A retained income statements
  2. Income statement
  3. Bank statement
  4. Cash flow statement

Answer: B) Income statement

Explanation:

A financial document showing the success or failure of a business transaction over a particular period is known as an Income statement.

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8. A decrease in retained earnings can be explained by the following factors?

  1. Investment by shareholders
  2. Assignments
  3. Net loss
  4. Total income

Answer: C) Net loss

Explanation:

Events that result in total loss in business flow and cash outflow will reduce the retained profits. This is usually the result of paying the costs of doing business. Additional costs such as rent, payment and purchasing of goods or services to provide services or products to customers are all factors that will reduce savings. Anything that deducts the income of a business or cash results in the immersion of the savings, even if the costs are required to keep the business running.

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9. The Retained Earnings account includes:

  1. Revenue of the organization for the current year.
  2. Re-investment in the business by shareholders.
  3. Collected profits have had fewer benefits since the inception of the organization.
  4. Money retained in the business.

Answer: C) Collected profits have had fewer benefits since the inception of the organization

Explanation:

The retained earnings account includes collected profits that have had fewer benefits since the inception of the organization.

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10. The finance manager is responsible for?

  1. good spending
  2. financial resource planning
  3. large organizational assets
  4. efficient financial management

Answer: B) financial resource planning

Explanation:

In his normal role the finance manager is responsible for organizing the financial services. Financial managers are responsible for the financial health of the organization. They produce financial reports, specific investment activities, and develop strategies and plans for the long-term financial goals of their organization.

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