Firms will raise all the common equity they can from retained earnings before issuing new common stock because capital from retained earnings is less expensive than capital raised from issuing new common stock.

True or False?

Firms will raise all the common equity they can from retained earnings before issuing new common stock because capital from retained earnings is less expensive than capital raised from issuing new common stock is True.

Explanation:

Firms will raise all the common equity they can from retained earnings before issuing new common stock because capital from retained earnings is less expensive than capital raised from issuing new common stock is True. the minimum rate of the return is necessary to attract an investor to purchase or give proper security. Further issuing the costs that is associated with the issuance and marketing of new securities have greater potential. When a company issues common stock to increase its capital, they proceed from the sale of that stock which becomes a part of its total shareholders' equity, but it does not affect retained the earnings.