The term 'retained profits':
A) is representative of the cash that the corporation has available to pay dividends as of the balance sheet date.
B) is found among the assets on the balance sheet of any profitable corporation.
C) refers to an item whose value is always as large as, or larger than, that of cash on the balance sheet.
D) refers to an account balance found on the balance sheet of a corporation that has paid dividends of lesser amount than profits since the beginning of the corporation.

Question

Quizplus · Accepted Answer

Retained profits refer to the balance of profit after dividend payments, so option D is the correct choice. Option A is incorrect as it implies that retained profits only represent cash available for dividends, while in reality, it represents the balance of profits after dividends. Option B is incorrect as retained profits are not an asset, but rather a component of the equity or owner's equity section of the balance sheet. Option C is incorrect as there is no such requirement for the value of retained profits to be always as large as or larger than cash on the balance sheet.

The Term 'Retained Profits