Cost of capital

Sriram Somayajula Admin

Retained earnings belong only to equity shareholders. Paid-up value also belongs only to equity shareholders. From a book, value perspective paid-up capital and retained earnings belong to shareholders. When the same shares are listed in the market, the price in the market reflects the earning potential of shares. Such earning potential comes from equity deployed by the shareholders in the business. The equity deployed is paid up capital they put in and profits that are made by the company but still retained in business i.e retained earnings (which belong to equity share holders)