Our Recommendations :-
Follow CA Final FB Page

what is cost of retained earnings ?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked almost 3 years ago

    2       0 Answer Now Comment Report
4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

It may be defined as the opportunity cost in terms of dividends foregone by/withheld from the equity shareholders. i.e. in other words, if the company would have given Reserves as Dividends at what rate of return the same would have been invested by the shareholder. So it envisages opportunity cost of money.

    0       0 Comment Report
Important Note – Preparing for CA Final?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

COST OF RETAINED EARNINGS It may be defined as the opportunity cost in terms of dividends foregone by/withheld from the equity shareholders. i.e. in other words, if the company would have given Reserves as Dividends at what rate of return the same would have been invested by the shareholder. So it envisages opportunity cost of money.

    1       0 Comment Report
Data?1494421730 rohit awasthi answered almost 3 years ago

Dear Friend > Cost of Retained Earning “ The residual of an firm's earnings over expenditures, including taxes and dividends, that are reinvested in its business. The cost of these funds is always lower than the cost of new equity capital, due to taxes and transactions costs.” In accounting, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. http://image.slidesharecdn.com/costofcapital-110427090145-phpapp01/95/cost-of-capital-16-728.jpg?cb=1303895895 Cost of Retained Earnings – Constant Dividend Growth Model = rs = D1/P0 + g Cost of Retained Earnings – Security Market Line Approach rs = rF + b(rM - rF). Thanks

    2       0 Comment Report
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered almost 3 years ago

COST OF RETAINED EARNINGS It may be defined as the opportunity cost in terms of dividends foregone by/withheld from the equity shareholders. i.e. in other words, if the company would have given Reserves as Dividends at what rate of return the same would have been invested by the shareholder. So it envisages opportunity cost of money. Cost of retained earnings is the same as the cost of an equivalent fully subscribed issue of additional shares, which is measured by the cost of equity capital. Retained earnings are “dividends withheld”, that is, if were in the hands of the investors (shareholders) they could have earned on these by investing somewhere else. The assumption is that the firm is earning “at least equal to ke on these retained earnings. So the cost kr is approximately equal to ke (a little less than ke because of floatation costs are not there, kr < ke) Thanks

    0       0 Comment Report
Get Notifications
Videos
Books
Notes
Loading
SIGN UP
Watch best faculty demo video classes

These top faculty video lectures will
help u prepare like nothing else can.