Question

The two basic sources of stockholders' equity are: A) common stock and bonds. B) common stock...

The two basic sources of stockholders' equity are:
A) common stock and bonds.
B) common stock and preferred stock.
C) paid-in capital and retained earnings.
D) loans from banks and gifts from donors.

Homework Answers

Answer #1

The two basic sources of stockholders' equity are Paid-in Capital and Retained Earnings.

Paid-in Capital :-

  • It is the money get into the business by selling stock in the company.
  • It is externally genrated capital.

Retained Earnings :-

  • When the company retain the part of net income after distribution of dividend is called retained earnings. Also a company can retain all the net income without distribution of dividend.
  • A company retain net income for the future uncertainties.
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