#1
What is the primary component of shareholders' equity?
Retained Earnings
ExplanationAccumulated profits not distributed as dividends.
#2
Which of the following represents the formula for calculating shareholders' equity?
Liabilities + Owner's Equity
ExplanationSum of what a company owes and what owners have invested.
#3
In what section of the balance sheet is shareholders' equity typically found?
Equity
ExplanationReflects ownership interest.
#4
Which of the following represents a source of shareholders' equity?
Payment of dividends
ExplanationReinvestment of profits into company.
#5
Which financial statement reports changes in shareholders' equity over a specific period?
Statement of Changes in Equity
ExplanationDetails changes in equity from activities.
#6
What does the term 'treasury stock' refer to in shareholders' equity?
Stock held by the company itself
ExplanationShares bought back by the company.
#7
What is the effect of a stock split on shareholders' equity?
No change
ExplanationNo impact on total equity value.
#8
How does the issuance of additional shares affect shareholders' equity?
Increases
ExplanationRaises total ownership interest.
#9
Which of the following events would decrease shareholders' equity?
Issuing dividends
ExplanationDistributing profits to shareholders.
#10
Which of the following represents an example of a non-recurring item affecting shareholders' equity?
Loss from discontinued operations
ExplanationOne-time loss from halted activities.
#11
What does the term 'comprehensive income' include?
Net income and unrealized gains/losses
ExplanationTotal income including unrealized gains.
#12
How does a stock buyback impact shareholders' equity?
Decreases
ExplanationReduces total outstanding shares.