The External Financing Need

question 20

Multiple Choice

The external financing need:

• A) will limit growth if unfunded.
• B) is unaffected by the dividend payout ratio.
• C) must be funded by long-term debt.
• D) ignores any changes in retained earnings.
• E) considers only the required increase in fixed assets.

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Definitions:

Main-Purpose Rule

A legal principle that if the main purpose of a guarantor to sign a surety agreement is to secure a personal benefit, the agreement does not have to be in writing to be enforceable.

Secondary Obligation

An obligation that arises indirectly or as a result of another primary obligation, often in legal or financial contexts.

Statute of Frauds

A legal concept that requires certain types of contracts to be written and signed to be enforceable.

Statute of Frauds

A legal concept that requires certain types of contracts to be executed in writing and signed by the party against whom enforcement is sought, to be legally enforceable.