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Financial Statements MCQs

Why would a creditor heavily scrutinize a company's statement of retained earnings?

Every dollar that is paid to the stockholders as dividends is a dollar not available to pay back its debt.

It gives the creditor insight as to whether it should buy the companies stock.

It tells the creditor how much debt the company is in.

Every dollar that is paid to the creditor is a dollar not available to pay back its debt.

Answer

Correct Answer: Every dollar that is paid to the stockholders as dividends is a dollar not available to pay back its debt.

Explanation:

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