Which statement regarding retained earnings is false?
A) Reinvesting earnings is more expensive than raising capital from outside sources.
B) Increases in retained earnings can occur because a firm has net income.
C) Increases in retained earnings can occur when the firm's common stockholders let management reinvest net income back into the firm rather than payout dividends.
D) None of the above.

Question

Quizplus · Accepted Answer

Reinvesting earnings (retained earnings) is generally considered less expensive than raising capital from outside sources because it does not involve transaction costs, issuing fees, or interest expenses associated with debt.

Which Statement Regarding Retained Earnings Is False