The Reason Why Reinvested Earnings Have a Cost Equal to Rs

question 47

True/False

The reason why reinvested earnings have a cost equal to rs is because investors think they can (i.e., expect to)earn rs on investments with the same risk as the firm's common stock, and if the firm does not think that it can earn rs on the earnings that it retains, it should distribute those earnings to its investors.Thus, the cost of reinvested earnings is based on the opportunity cost principle.

Identify and correct common errors in accounting entries.

Calculate total credits on a trial balance.

Recognize the effects of purchasing supplies on account.

Analyze the effect of transactions on cash balance.

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Definitions:

Unforeseen Difficulties

Unexpected challenges or obstacles that were not anticipated, making a task or goal harder to achieve.

Preexisting Duty

An obligation that a party is already legally bound to perform, which cannot serve as consideration for a new contract.

Foreseen Difficulty

An anticipated challenge or problem that can be predicted based on current knowledge or trends.

Preexisting Duty

Preexisting duty refers to an obligation that a party is already legally required to perform, which cannot be used as consideration for a new contract.