While External Funding Needs Can Be Approximated by Subtracting Cash

question 60

Multiple Choice

While external funding needs can be approximated by subtracting cash dividend payments from cash flow from operations,the decision is not simple because

• A) dividend policy is not fixed
• B) there are legal costs to raising capital externally than by retaining internal cash flow
• C) The Securities Act of 1933 only allows external capital to be raised during certain months of the year. If a firm needs funds at another time it must use internal sources.
• D) None of the above
• E) both (a) and (b)

---

Definitions:

Green Mineral Olivine

A common silicate mineral found in the Earth's mantle, recognized by its olive-green color.

Continental Crust

The thick, generally granitic part of the Earth's crust that forms the continents and continental shelves, distinguished from the denser, thinner oceanic crust.

Oceanic Crust

The outermost layer of Earth's lithosphere that lies beneath the oceans, composed mainly of basalt rock formed from volcanic processes at mid-ocean ridges.

Mantle

The most voluminous layer of Earth; located below the crust and above the core.