1. The amount of the Retained Earnings is absorbed into the total assets and has been used by the management because it is the amount reinvested into the business.

True

False

2. When a company continuously reports net losses from its operations, its retained earnings may become negative.

True

False

3. Which of the following descriptions is wrong about ratios and ratio analysis?

Some ratios can indicate whether the company has enough resources on hand to pay its immediate debt.

Certain ratios can indicate the companys ability to handle its long-term debt using its entire resources.

ROS can provide information about how effectively operating costs and expenses have been controlled in its operations.

Ratios are direct answers to the problems a company may face.

Business managers must learn to use ratios to identify real problems that may be presented by ratios.