There is an opportunity cost associated with stockholder funds
Retained earnings are considered part of owners' equity. They represent the cumulative amount of net income that a company has retained, rather than distributed as dividends to shareholders. Retained earnings reflect the company's growth and reinvestment into the business, contributing to the overall equity value.
Cost of carrying inventory has an inverse relationship with the earnings of the enterprise. Ergo, the more we lessen the carrying cost of the inventory, the more we can maximize our earnings. -Noli M. Olan
Yes
Income: all valuable earnings. Profit: valuable earnings minus valued effort/cost in achieving initial income.
There is an opportunity cost associated with stockholder funds
The definition of reinvestment assumption is an assumption made concerning the rate of return that can be earned on the cash flows generated by capital budgeting projects. The cash flow can be interest, earnings, dividends, or rent.
Retained earnings have an opportunity cost associated with them because they can be invested to earn more rather than keeping them idle. For example reatined earnings can be invested in a savings account in a bank and earn interest but if this is not done the are loosing some extra income and so if they are invested somewhere else, the bank rate will be the opportunity that has been lost. Opportunity cost is the real cost of choosing one thing and not another.
no, they are not tax free. The dividends are taxed in the year paid. The dividend reinvestment is a purchase of stock just as if you used cash. You have to track every single purchase transaction of stock from every reinvestment to keep track of the cost basis of each stock, so as to cost it out when you sell. Motley fool has some nice info on this
Retained earnings are considered part of owners' equity. They represent the cumulative amount of net income that a company has retained, rather than distributed as dividends to shareholders. Retained earnings reflect the company's growth and reinvestment into the business, contributing to the overall equity value.
Cost Ratio = expenses/earnings
Cost of carrying inventory has an inverse relationship with the earnings of the enterprise. Ergo, the more we lessen the carrying cost of the inventory, the more we can maximize our earnings. -Noli M. Olan
Earnings Before Tax / Earnings Before Interest and Tax It provides a comparative measure of the cost of debt.
Critics argue that equivalent yield, which is calculated using the reinvestment rate assumption, may not reflect the actual reinvestment opportunities available. Additionally, it assumes that coupon payments can be reinvested at the equivalent yield, which may not always be achievable in practice. Lastly, equivalent yield does not account for the risk associated with reinvestment, potentially leading to inaccurate valuation results.
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Yes
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