The cheapest source of finance is _____________.

Debenture

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Equity Share Capital

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Preference Share

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Retained Earnings

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Solution

The correct option is D Retained Earnings
Financing decision involves identification of various available sources. The main sources of funds for a firm are shareholders funds and borrowed funds. Shareholders funds refer to equity capital and retained earnings. Borrowed funds refer to finance raised as debentures or other forms of debt. Retained earnings are the part of funds which are available within the business and is hence a cheaper source of finance.

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Similar questions

The cheapest source of finance is

(a) debenture

(b) equity share capital

(d) retained earning

(a) Discuss any three characteristics of debentures.

(b) Discuss any three limitations of retained earning as a source of Finance.

Discuss the merits and demerits of retained earnings as a source of business finance.

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