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yan [13]
3 years ago
13

If a firm needs additional capital from equity sources once the retained earnings breakpoint is reached, it will have to raise t

he capital by issuing new common stock.a. True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock.b. False: Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control
Business
2 answers:
Harrizon [31]3 years ago
6 0

Answer:

The correct answer is a. True.

Explanation:

Issuing new common stock helps a firm raise money. The capital is used to help the business grow, such as to acquire another company, pay debts or to have access to more cash for general corporate reasons.  

Therefore, firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock.      

zavuch27 [327]3 years ago
6 0

Answer:

True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock.

Explanation:

Firms have 2 equity sources, that is retained earnings and shares.

Retained earnings are the profit realised from business activities. Some part of it is paid as dividends to shareholders and the rest is pit back into the business.

When retained earnings are not enough for running of the business or theere is need of capital for expansion the business issues shares.

Shares are bought by stockholders in exchange for a stake in the company.

Note retained earnings are cheaper source of funds than shares. Retained earnings are profit from business and we will not need to pay for its use. However on shares dividends are paid to shareholders.

Retained earnings are the first choice for equity and then shares are issued for extra funds.

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Since the airbag was not as effective as it was expected by the customers, a suit against the car manufacturers from product liability may see the court conclude that the air bag was defective since it did not meet the expectations of a reasonable consumer which would have been protecting her head from hitting the steering wheel which still occured even tho the air bag was deployed.

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2 years ago
Presented below is information related to Lexington Real Estate Agency.
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Oct 1

DR Cash............................................................................$20,000

CR Common Stock.........................................................................$20,000

Oct 2. No entry required

Oct 3

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CR Accounts Payable................................................................$2,300

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DR Accounts Receivable.............................................$3,600

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3 0
3 years ago
Suppose that $2000 is loaned at a rate of 11.5% , compounded semiannually. assuming that no payments are made, find the amount o
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This problem is solved by using the compound interest formula:
 A=P(1+(I/period))^(number of periods)
 Where A = amount accumulated and P = amount loaned and I = Interest 
 A = ? P = $2, 000, I = 0.115, Period = 2 (semi annually) Number of period = 2
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 So we have 
 A = 2000 ( 1 + 0.115/2)^(14)
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 So we have 4374.80 to the nearest cent.
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2 years ago
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