As a financial manager at Marshall Manufacturing, Chase is exploring sources of long-term funds to finance the construction of Marshall's newest plant. Chase would prefer a funding source that does not require interest payments or involve major underwriting fees. Chase will consider using retained earnings to fund the construction project.

Question

Quizplus · Accepted Answer

Retained earnings are profits that have been reinvested in the company. Since Marshall Manufacturing is profitable, such funds may be available. Using retained earnings saves the company interest payments, dividends, and any possible underwriting fees. Also, there is no dilution of ownership.

As a Financial Manager at Marshall Manufacturing, Chase Is Exploring