Which is the expensive of funds-New Preference SharesRetained EarningsNew Equity SharesNew Debts

Question

Toppr Admin · Accepted Answer

Companies may use various sources of funds for their venture- Preferred stock and common stocks are the most common source of funding- Choosing a particular source of funding depends on the risk involved and the expected required rate of return by the investors- Therefore- one need to do the risk assessment before finalizing any source of funds which can be assessed on the cost of capital-Common stock are considered as more expensive source of fund against the preferred stock which has a fixed component of dividend-

	Rs
Equity Share Capital	75,000
Preference Share Capital	25,000
General Reserve	45,000
Accumulated Profits	30,000
Debentures	75,000
Sundry Creditors	40,000
Outstanding Expenses	10,000

Which is the most expensive source of funds?New Preference SharesRetained EarningsNew Equity SharesNew Debts

Which is the most expensive source of funds?
New Preference Shares
Retained Earnings
New Equity Shares
New Debts