Retained Earnings Has a Cost Associated with It Because

question 93

Multiple Choice

Retained earnings has a cost associated with it because

• A) new funds must be raised.
• B) there is an opportunity cost associated with stockholder funds.
• C) K_e > g.
• D) flotation costs increase the cost of funding.

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Definitions:

Revenues

The total income generated by a company from its normal business activities, typically from the sale of goods and services to customers.

Liabilities

Financial obligations or debts that a company owes to others, which must be paid or settled in the future.

Ending Equity

The value of an owner's interest in a company at the end of an accounting period, calculated as total assets minus total liabilities.

Net Income

Refers to the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.