Retained Earnings Are a Cheaper Source of Funds Than the Sale

question 69

Multiple Choice

Retained earnings are a cheaper source of funds than the sale of new equity because

• A)retention defers the payment of taxable dividends to shareholders
• B)there are no flotation costs
• C)new shares are usually priced below current market price
• D)all these

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Definitions:

Financing

The act of providing funds for business activities, making purchases, or investing.

Operations

The day-to-day activities involved in running a business, including production, sales, and administration, aimed at generating profits.

Total Assets Ratio

A financial metric used to assess the proportion of a company's assets that are financed by its shareholders.

Average Total Assets

Average total assets is a metric that represents the average value of all the assets owned by a company over a specific time period, indicating the company's asset size and usage efficiency.