Asked by Jaylee Field on Jul 05, 2024
Verified
Which of the following equations is correct?
A) Dividends = Net income - Change in Retained Earnings
B) Dividends = Net income + Change in Retained Earnings
C) Dividends = Change in Retained earnings - Net income
D) None of the above
Dividends
Monetary distributions from a company to its shareholders, often based on the profits of the business.
Net Income
Net income is the total profit of a company after all expenses and taxes have been deducted from total revenues.
Retained Earnings
Profits that a company keeps after dividends have been paid out to shareholders, often reinvested in the business or used to pay down debt.
- Understand the calculation and implications of dividends, retained earnings, and their relation to net income.
Verified Answer
TP
tiara pingakJul 06, 2024
Final Answer :
A
Explanation :
Dividends are paid out from the net income after adjusting for the change in retained earnings. The correct equation is Dividends = Net Income - Change in Retained Earnings, where the change in retained earnings is the amount kept by the company to reinvest in its core business, or to pay debt.
Learning Objectives
- Understand the calculation and implications of dividends, retained earnings, and their relation to net income.