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    If retained earnings remain constant, what does this say about net income and dividends?

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    On its 1999 balance sheet, Sherman Books showed a balance of retained earnings equal to $510 million. On its 2000 balance sheet, the balance of retained earnings was also equal to $510 million. Which of the following statements is most correct?

    A. The company must have had net income equal to zero in 2000.
    B. The company did not pay a dividend in 2000.
    C. If the company's net income in 2000 was $200 million, dividends paid must have also equaled $200 million.
    D. If the company lost money in 2000, they must have paid a dividend.
    E. None of the statements above is correct.

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    Solution Summary

    This solution briefly describes the balance of retained earnings.