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Question
How do Retained Earnings impact the growth potential of a company?
Options
They limit the company’s ability to invest in new projects.
They increase the company’s tax liability.
They attract more investors and improve creditworthiness.
They lead to increased dividend payments to shareholders.
MCQ
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Solution
They attract more investors and improve creditworthiness.
Explanation:
Retained earnings build internal capital, boosting financial strength, credibility and borrowing capacity; this attracts investors and improves creditworthiness, enabling the firm to finance expansions and new projects without relying on external funds.
shaalaa.com
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