ENTREPRENEURIAL FINANCE
SOURCES OF FUNDING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following disadvantages relate to retained profit
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Some loss of control by the owner
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Insufficient funds to be able to achieve objective such as expansion
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High interest payments
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Spending it can reduce the chance of other sources of funding being available to the business
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Explanation:
Detailed explanation-1: -Whereas on the other side, the disadvantages of retained profit, like over-capitalization, inefficient use of funds, shareholders’ dissatisfaction, etc., tend to have grave effects on the business’s reputation. These two sides of the concept are undeniable.
Detailed explanation-2: -Answer and Explanation: Explanation: A stock dividend decreases the balance in retained earnings just like any other form of a dividend that is declared.
Detailed explanation-3: -Retained earnings decrease if the company experiences an operating loss-or if it allocates more in dividends (distributions to shareholders) than its net income for the accounting period.
There is 1 question to complete.