Whether the firms prefer to fund investment using debt or retained earnings than equity. Introduction: Retained earnings are the net earnings after dividend that are reserved in a company either to reinvest in company’s core business or to pay off its debts. Debt is a money borrowed by one party from another that is used by many companies and individuals to make large purchase. Equity is the total value of assets less than the total value of liabilities available in a company.

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Chapter 16.8, Problem 2CC

Summary Introduction

To discuss: Whether the firms prefer to fund investment using debt or retained earnings than equity.

Introduction:

Retained earnings are the net earnings after dividend that are reserved in a company either to reinvest in company’s core business or to pay off its debts.

Debt is a money borrowed by one party from another that is used by many companies and individuals to make large purchase.

Equity is the total value of assets less than the total value of liabilities available in a company.

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