Category: B.COM NOTES

Part of profit which is not distributed as dividend is retained earnings. Unlike debt and equity, there is no obligation to pay any return on retained earnings. So, we can say that there is no cost of retained earnings. But it is not so. From shareholder’s point of view, the retained earnings do have some cost. if that amount was Read More …

Cost of Equity is the minimum rate of return a company must earn on its equity-financed portion of the investment project in order to leave unchanged the market price of such shares. There is no legal obligation to pay dividend on equity shares and rate of dividend to be paid to equity shareholders is also not determined. But the company Read More …

Cost of debt refers to the cost which a company has to bear for using fixed interest bearing securities such as debentures, long-term loans and bonds etc. it is mainly associated with debenture. It has two types Cost of redeemable debt or perpetual debt: perpetual debt refers to issue of debentures which will not be redeemed during the lifetime of Read More …

Businesses acquire funds from market in various forms. These generally include Equity shares, preference share, debentures and long-term loans. The company after acquiring funds from investors, invests those funds in various projects. The investor who contributes funds in any form expects some returns on their contribution. The company must earn a certain rate of return that satisfies their investors expectation. Read More …