Retained earnings are an economical, self-financed and permanent source of capital for a company, but at times creates dissatisfaction among shareholders and may result in overcapitalisation. Identify the values reflected in this statement.

Open in App

Solution

The values reflected in this statement are as follows :

1. Optimum financial planning.

2. Securing and promoting the interest of creditors and shareholders.

3. Helps in improving the public image of the company.

4. Risk of re-utilisation of funds against the interest of shareholders.

Suggest Corrections

Similar questions

Q. No charge is created against assets when retained earnings are taken as a source of finance.

___ is the riskless source of finance, as there is no obligation on the company to pay dividends or repay the capital of the shareholders, whether they earn a profit or not.

Retained earnings are called self-financing.

The cheapest source of finance is

(a) debenture

(b) equity share capital

(d) retained earning

Directors of Roma Ltd. wants to use debentures for expansion plans but the finance manager wants to use retained earnings for this purpose. You as a finance manager has to convince directors how retained earning s are better than debentures.

Join BYJU'S Learning Program

Retained earnings are an economical, self-financed and permanent source of capital for a company, but at times creates dissatisfaction among shareholders and may result in overcapitalisation. Identify the values reflected in this statement.

The values reflected in this statement are as follows : 1. Optimum financial planning. 2. Securing and promoting the interest of creditors and shareholders. 3. Helps in improving the public image of the company. 4. Risk of re-utilisation of funds against the interest of shareholders.

The values reflected in this statement are as follows :

1. Optimum financial planning.

2. Securing and promoting the interest of creditors and shareholders.

3. Helps in improving the public image of the company.

4. Risk of re-utilisation of funds against the interest of shareholders.