After enjoying the increased sales and profits of several popular products,XYZ Inc.plans to expand their production facilities.The firm,a well-known producer of lawn care products,prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs.Which of the following best meets the needs of XYZ Inc.?

Question

Quizplus · Accepted Answer

Retained earnings allow XYZ Inc. to use their profits from previous successful products to finance the expansion project without incurring interest or dividend payments or underwriting costs. Venture capital would require giving up ownership stake and control in the company, while debenture bonds and common stock both involve interest or dividend payments as well as underwriting costs.

After Enjoying the Increased Sales and Profits of Several Popular