Question

19. Creation of Reserve is
O illegal
O Necessary
ONot necessary
OUseless​

Answer 1

Answer:

necessary

Explanation:

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Answer 2

A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. This is done to keep funds from being used for other purposes, such as paying dividends or buying back shares. It can serve as a signal to investors, that a certain amount of cash is not to be distributed to them in the form of dividends. The board of directors is authorized to create a reserve.

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