Question

The external financing need: Select one: a. is unaffected by the dividend payout ratio. b. will...

The external financing need:

Select one:

a. is unaffected by the dividend payout ratio.

b. will limit growth if unfunded.

c. ignores any changes in retained earnings.

d. considers only the required increase in fixed assets.

e. must be funded by long-term debt

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Homework Answers

Answer #1

d. considers only the required increase in fixed assets.

Explanation

External financing is of two types debt and equity financing The amount of external funds needed will be equal to the expected increase in assets at the higher sales level, and that will be reduced by the immediate increase in liabilities orignate from the initiative, and will again reduced by any increase in retained earnings. And there is direct relationship between external financing and dividend pay out

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