Cost of retained earnings and external equity, Financial Management

Assignment Help:

Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity???

Also explain the hoe can ew calculate the external equity?

Help me

 


Related Discussions:- Cost of retained earnings and external equity

Calendar studies, Calendar Studies These attempted to predict rates of ...

Calendar Studies These attempted to predict rates of return during a calendar year and examine if there is any particular observable pattern in the rates of return on the stock

Explain the term- administration of decisions, Explain the term- administra...

Explain the term- administration of decisions Conformance, compliance and efficiency This is focussed on the "administration of decisions" . Processes and procedures m

Definition of financial leverage, Q. Definition of financial leverage? ...

Q. Definition of financial leverage? One of the goals of planning an appropriate capital structure is to maximize the return on equity shareholders fund or else maximize the ea

Audit opinion, Clean Opinion - AUDIT opinion not qualified for any material...

Clean Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). Also called UNQUALIFIED OPINION

What are the ifrs 8 operating segments, What are the IFRS 8 operating segme...

What are the IFRS 8 operating segments IASB issued IFRS 8 operating segments in November 2006 (which replaced IAS 14). This continues IASB's work in its joint short-term conver

How are the members of the board of directors, How are the members of the b...

How are the members of the board of directors of a corporation chosen and to whom do these board members owe their primary allegiance? The Members of a corporation's board of d

Leverage, what is the meaning of market feasibility? What are its different...

what is the meaning of market feasibility? What are its different types with their degree?

Explain the cash and cash equivalents, Explain the Cash and cash equivalent...

Explain the Cash and cash equivalents Cash and cash equivalents include: Bank and cash balances Short term investments that are highly liquid and can be converted

Evaluate the total expected present value of benefits, Question: Susan ...

Question: Susan started her current job at age 30, with the normal retirement age at 60. The remuneration package of her employment includes the following benefits on top of he

Define flowcharts - documenting the accounting system, Flowcharts - Documen...

Flowcharts - Documenting the accounting system Depict in outline the sequence of events in a system showing document flow and department or function responsible for every ev

Bella

2/14/2013 12:05:49 AM

It is usefull for you.

Cost of Retained Earnings and External Equity:

Equity finance may be calculated in two ways. Firstly by using Retained Earnings and then by issue of additional equity. The cost of equity or the return given by equity shareholders is the same in both cases. Irrespective of whether a firm raises equity finance either by retained additional equity or earnings, the cost of equity is the similar. The only dissimilarity is in floatation costs. There are no floatation costs for earnings whereas there is a floatation cost of 2 to 10% or sometimes even more for additional equity.

The companies do not usually distribute the entire profits earned by them by way of dividend among their shareholders. Some profits are retained by them for future expansion of the market. The cost of retained earnings is the earnings gain by the shareholders. In other words, the opportunity cost of retained earnings can be taken as the cost of retained earnings. It is same as the income that the shareholders would have otherwise earned by placing this money in alternative investments.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd