Sources of Business Finance · Class 11 · CBSE · Commerce Business Studies
What is the primary advantage of retained earnings as a source of business finance?
Practice question from Sources of Business Finance (Class 11 · CBSE · Commerce Business Studies), with the correct answer and a step-by-step solution.
easy · MCQ · Q-B3D2BB
What is the primary advantage of retained earnings as a source of business finance?
- A.It requires payment of a fixed rate of dividend.
- B.It involves heavy floatation costs and brokerage.
- C.It is an internal source free from explicit floatation costs and interest burdens.Correct answer
- D.It dilutes the voting control of existing equity shareholders.
Solution
Retained earnings are ploughed-back profits of the business. Being an internal source, they do not involve any floatation costs, interest, or dilution of control.
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