Question

company's retained earnings have a financing cost associated with them because retained earnings belong to which of the following? a. The common stockholders b. The company's long-term debt holders c. The preferred stockholders d. The company

Answer 1

Answer:

a. The common stockholders.

Explanation:

A company's retained earnings have a financing cost associated with them because retained earnings belong to the common stockholders.

Retained earnings can be defined as the accumulated profits or net income generated by an organization but are not distributed or given as dividends to the stockholders, rather are reinvested in to the business.

Generally, retained earnings are used to pay off debts, used for capital expenditures and working capitals.

Retained earnings represents the total stockholders' equity reinvested back into the company.