Question

Claims held by the shareholder (owners) of a corporation are referred to as: A) share capital...

Claims held by the shareholder (owners) of a corporation are referred to as:

A) share capital minus retained earnings

B) share capital plus retained earnings

C) share capital

D) retained earnings

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Answer #1

Claim of shareholder is the amount owed to shareholder which is also calculated as net assets. They have residual claim in the business of company which is calculated as share capital plus retained earnings. Retained earnings are the accumulated net income earned by company over the years and belongs to owners of the company. Only share capital and only retained earnings are not the only claim of shareholders. The claim of shareholder include both retained earnings and share capital.

Thus, option (A), (C) and (D) are incorrect and option (B) is correct

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