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:

Restrictions

Limitations or conditions imposed by law, regulation, or agreement that control how something can be used or what actions can be taken.

Buy-and-Sell Agreement

A legally binding agreement between co-owners that outlines what happens to a co-owner's share of a business if they leave the business or pass away.

Close Corporation Shareholders

Individuals or entities that hold shares in a closely held corporation, typically characterized by a small number of shareholders and restricted share transferability.

Uniform Commercial Code

An extensive collection of regulations designed to oversee every commercial deal within the United States, aiming to make the law uniform and less complicated.