Economic Studies Show That the Rate of Return on Research

question 34

Essay

Economic studies show that the rate of return on research and development investment is very high,possibly yielding 25-50% a year.Why,then,are banks reluctant to lend to start-up firms investing in a new idea,and where do these firms get their capital?

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Definitions:

January 1 Retained Earnings

The amount of net income left over for a company from the previous fiscal year, reported at the start of the new year on January 1.

Downstream Transfer

A transaction or movement of goods, services, or funds from a parent company to a subsidiary or from a higher level to a lower level within an organizational structure.

Upstream Transfer

A transfer of assets or resources from a subsidiary to its parent company, often examined for tax and financial reporting implications.

Worksheet Entry

An adjustment recorded on a worksheet, which is not yet posted to formal accounting records, often used in the process of preparing financial statements.