Question

The firm A reports $20 millions of retained earnings on its balance sheet, which of the following statements is correct?

Group of answer choices
a)The $20 millions are available to be distributed to shareholders
b)This retained earnings belong to the common stockholders.
c)This retained earnings belongs to both common stockholders and preferred stock holders.
d)The retained earnings must be retained for future dividend distribution in case the firm has negative income in future years.

Answer 1

Answer and Explanation:

B) This retained earnings belong to the common stockholders.

Retained earnings represents the accumulated profits of a company that have not been distributed to shareholders in the form of dividends. It belongs to the common stockholders as they are the residual claimants on a company's earnings and assets after all other obligations are satisfied.