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Hi,
Question 19
Which of the following statements about equity finance is correct?
A.Equity finance reserves represent cash that is available to a company to invest
B.Additional equity finance can be raised by rights issues and bonus issues
C.Retained earnings are a source of equity finance
D.Equity finance includes both ordinary shares and preference shares
Why is D not correct? The question did not mention about whether the preference shares are redeemable or irredeemable. So, I thought we should always assume it is irredeemable unless being told otherwise. If it is irredeemable then it should be equity, right?
Both C and D are correct?
Answer given is C only.
You are referring to financial accounts presentation, but that is not relevant for Paper FM.
Equity finance is ordinary share capital plus reserves.
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