Answered: Using your own words, briefly…

Using your own words, briefly (hopefully) explain: (a). What is "retained earning"? How does after-tax cash flows differ, when purchasing with retained earning vs. with loan?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter26: Mergers And Corporate Control

Section: Chapter Questions

Problem 5MC

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Using your own words, briefly (hopefully) explain:

(a). What is "retained earning"? How does after-tax cash flows differ, when purchasing with retained earning vs. with loan?

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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