Suppose again that furniture production is more capital-intensive relative to clothing production, which is more labor-intensive. If the relative price of furniture to clothingrises, this will:.A. lower the incomes of both labor and capital owners. B. raise the income of labor owners. C. raise the income of both labor and capital owners. D. raise the income of capital owners.

The correct answer is D. raise the income of capital owners

Explanation:

Stockholders' equity includes the accumulated profits of the company and the amount of capital invested by its shareholders in exchange for shares of its common and preferred shares. When there is an increase in the income or capital of a company, the overall result is an increase in the balance of the company's equity. Net worth can increase the sale of capital shares, increasing the company's income and decreasing its operating expenses.

A company can plan the exact amount of the increase in stockholders' equity, as in the case of an issue of common and preferred shares at a set price. This change differs from an increase that can occur to equity, as a result of net income, while the company plans to make a profit from operations, its real net income is only known after the fiscal year has ended.

When a company issues common and preferred shares, the shareholder's equity section of the balance sheet increases in the share price of the shares. The nominal value can be shown as a separate item from the additional paid capital on the shares or the balance can be totaled on the same line. A company can increase the accounting capital by issuing capital shares to pay off its debts and reduce interest costs.

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