To explain: The relation shared between the marginal principle of
Introduction:
Retained Earnings:
Retained earnings is a portion of the profits earned by a business not disbursed by the company as dividend to its shareholders so that it can be used for future investments.
Answer to Problem 1DQ
The marginal principle of retained earnings states that a company should perform an analysis of whether the company or stockholders earn more on the funds related to retained earnings.
Explanation of Solution
Explanation:
As per the marginal principle of retained earnings, the earnings that the stockholders would earn on other investments should also be considered. According to this principle, a company should analyze the earnings of company as well as shareholders to see who earns most on the funds associated with retained earnings.
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Chapter 18 Solutions
Foundations of Financial Management
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