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Homework answers / question archive / An investment is said to be liquid if the investment: Select one: a
An investment is said to be liquid if the investment:
Select one:
a. is traded on a stock exchange.
b. can easily be converted into cash.
c. has a large bid-ask spread.
d. has large day to day fluctuations in price.
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A firm's year-end retained earnings balances are $670,000 and $560,000, for 2014 and 2015 respectively. The firm paid $10,000 in dividends in 2015. The firm's net profit after taxes in 2015 was ______.
Select one:
a. $110,000
b. $100,000
c. -$110,000
d. -$100,000
Answer:
a) Option (B) - Can easily be converted to cash
Liquidity in finance and investments means how easy it is to convert the investment into cash. Hence, option (b) is correct.
b) Option (d) - -$100000
Retained earnings = Beginning Retained earnings + Net Profit - Dividends
Net Profit = Change in Retained earnings + Dividends
= $560000 - $670000 + $10000
= -$100000
Hence, net profit in 2015 was -$100000.
