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:

Secondary Market

A marketplace where investors buy and sell securities or assets from other investors rather than from issuing companies directly.

Primary Labor Market

The segment of the labor market characterized by high-skilled, high-wage jobs with good working conditions and benefits.

Secondary Labor Market

Describes jobs characterized by lower pay, less job security, and fewer benefits compared to the primary labor market, often including part-time or temporary positions.

Legal Minimum Wage

The lowest hourly rate that employers can legally pay their workers, as mandated by government law.