Question

Which one of these statements is correct? Long-term debt is the residual difference between assets and liabilities. Net income that is not paid out in dividends decreases retained earnings. Long-term debt requires a payout of cash within a stated time period. Stockholders' equity is stated at market value on the balance sheet. Stockholders' equity increases as the liquidity of a firm increases.

Answer 1

Answer:

Long-term debt requires a payout of cash within a stated time period.

Explanation:

Interest on long term liabilities is a cash payout for a specified time period. Commonly interest expenses is associated with the long term liabilities unless there is any bank overdraft which requires the interest payment.

Equity is the residual of Assets and Liabilities.

Net income Residua of dividend increase the retained earning.

Stockholders equity is recorded at the issued or book value in the balance sheet.

Long term liabilities might also be a cause for increase in Liquidity.

Answer 2

Answer:

Long term debt requires a payout of cash within a stated time period.

Explanation:

When entering into a long term debt, there are terms and conditions like interest to be charged and payment terms so obviously there is an expected cash payout to repay the debt at a stated time period.