Since Retained Earnings Are Viewed as a Fully Subscribed Issue

question 137

Multiple Choice

Since retained earnings are viewed as a fully subscribed issue of additional common stock, the cost of retained earnings is

• A) greater than the cost of new common stock equity.
• B) less than the cost of new common stock equity.
• C) not related to the cost of new common stock equity.
• D) equal to the cost of new common stock equity.

---

Definitions:

Second Law

In thermodynamics, it states that the total entropy of an isolated system can never decrease over time, and is often associated with the concept of energy degradation.

Thermodynamics

The branch of physics that deals with the relationships between heat and other forms of energy, and how these affect matter, encompassing laws that describe energy conservation and entropy.

Energy Conversion

The process of transforming energy from one form into another, such as converting kinetic energy into electrical energy.

Law

A system of rules that are created and enforced through social or governmental institutions to regulate behavior.