When Retained Earnings Are Used Up and New Common Stock

question 11

Multiple Choice

When retained earnings are used up and new common stock is issued, we know that the cost of:

• A) equity has increased
• B) equity has dropped
• C) equity is unaffected
• D) both common and preferred stock are affected

---

Definitions:

Maximize Profit

The process or strategy aimed at achieving the highest possible profit from business operations, often by increasing revenue, reducing costs, or both.

Profit-maximizing Quantity

The level of output at which a firm achieves its highest profit, where marginal cost equals marginal revenue.

Total Profit

The overall financial gain made by a business after subtracting all expenses from the total revenue.

Profit-maximizing Price

The price level at which a company can sell its product to achieve the maximum possible profit, taking into account demand and production costs.