Accounting U4 T3

Indicate whether each of the following statements is true or false. Any legal action against a company is taken against the owners of the company.

• True

• False

‘Limited’ generally indicates that the liability of the shareholders to the company is limited to the agreed purchase price of their shares.

• True

• False

If a dividend is not paid on ordinary shares during this financial period, then the shareholders must be paid double the dividend in the next financial period.

• True

• False

Many companies have large amounts of cash because they have large amounts of reserves.

• True

• False

Retained earnings represent part of the shareholders’ equity.

• True

• False

Retained earnings in a company represent past profits and so are represented in cash.

• True

• False

Interest on debentures appears in the Statement of Retained Earnings.

• True

• False

Horizontal analysis involves taking a key line item in one of the financial statements, choosing a base year, and calculating how much the item has increased or decreased each year from the base.

• True

• False

Vertical analysis gives an indication of performance over many years.

• True

• False

Dividends paid represent a cash outflow from financing activities.

• True

• False