Shareholders' equity is comprised of:
A)common shares and dividends.
B)common shares and retained earnings.
C)dividends and retained earnings.
D)profit and retained earnings.

Question

Quizplus · Accepted Answer

Shareholders' equity includes common shares and retained earnings. Common shares represent the equity raised by the company by selling its ownership shares to the investors, while retained earnings are the portion of the net income of the company that is retained after dividends are paid to the shareholders. Therefore, option B is the correct answer. Option A and C are incorrect because dividends are not a part of shareholders' equity, instead, they are a distribution of profits to the shareholders. Option D is also incorrect because profit is not a part of shareholders' equity but is rather a component of the income statement.

Shareholders' Equity Is Comprised Of