Which statement regarding financial statements is true?

A) Dividends paid reduce the net income that is reported on a company's income statement.
B) If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
C) If a company issues new long-term bonds during the current year, this will increase its reported current liabilities at the end of the year.
D) If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance.

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Mohnish Namani · Accepted Answer

Final Answer : D, Explanation :  If a company pays more in dividends than it generates in net income, the excess must be taken out of retained earnings, which will cause a decline in the balance of retained earnings reported on the balance sheet. Choices A, B, and C are all false statements.

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