Which of the Following Is the Reason Why an Internally

question 78

Multiple Choice

Which of the following is the reason why an internally financed company selling its products at a lower price can earn more profit than a competitor who is operating on borrowed money?

• A) Investors are more likely to purchase a company's stock if it is internally financed.
• B) It is less expensive since no interest expense is involved.
• C) The value of stock of an internally financed company is easier to predict.
• D) Market forecast is more difficult if a company is operating on borrowed money.
• E) Commercial banks do not allow a company to borrow money unless it can provide collateral security.

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Definitions:

Consumption

The use of goods and services by households, which is a primary component in calculating the gross domestic product of an economy.

Price Change

A variation in the cost of a good or service over time.

Garden Yields

The produce or output generated from gardening activities, including fruits, vegetables, and flowers.

Utility Function

A mathematical representation of how consumers rank different bundles of goods according to their level of satisfaction or preference.