After enjoying increased sales of and profits from several popular products, Braggs & Stritton 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 Braggs & Stritton?

Question

Quizplus · Accepted Answer

Retained earnings are the profits that the company has retained after paying dividends to its shareholders. Therefore, using this source of funding would avoid interest and dividend payments as well as underwriting costs, meeting the needs of Braggs & Stritton. Using venture capital or debenture bonds would require interest payments, and issuing common stock would result in dividend payments to shareholders.

After Enjoying Increased Sales of and Profits from Several Popular