Final answer:
The statement is false as share capital is the money raised through issuing shares, while retained earnings are profits reinvested in the company, not the initial capital.
Step-by-step explanation:
The statement 'The basic component of share capital is retained earnings' is false. Share capital refers to the money that a company raises by issuing shares of stock. When a company issues stock via an Initial Public Offering (IPO), it receives financial capital from the public. Retained earnings, on the other hand, are the portion of profits that a company decides to keep and reinvest in the business rather than distribute as dividends. Therefore, retained earnings are not the basic component of share capital; they are part of the shareholders' equity but originate from a different source than share capital.