If a Firm Cannot Invest Retained Earnings and Earn at Least

question 31

True/False

If a firm cannot invest retained earnings and earn at least the cost of equity, it should pay these funds to shareholders and let them invest directly in other assets that do provide this return.

---

Definitions:

Accounts Payable

A liability in the form of amounts owed by a company to its creditors or suppliers for goods or services received.

Perpetual Inventory System

An inventory system that records changes in inventory levels after every transaction, ensuring continuous, real-time updates.

Accounts Payable

A liability account that records amounts owed by a company to suppliers or creditors for purchases made on credit.

Merchandise Inventory

Represents the goods a company intends to sell to customers that are purchased and stored, evaluated as a current asset on the balance sheet.