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Retained earnings and opportunity cost

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Explain in at least 200 words, why retained earnings have an associated opportunity cost.

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The solution examines retained earnings and opportunity costs.

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Every investment made by a company is in anticipation of adequate returns. After payment of interest and meeting the statutory obligations for depreciation and taxation, the balance of the earnings are paid as dividends or retained as internal accruals. Instead of raising a debt initially and repaying the same through earned profits and provisions made for depreciation in subsequently ...

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