Which of the following is NOT a sensible reason for a firm to rely on internal funds?
A)Equity issues are generally expensive.
B)A new bond issue may drive the firm's debt ratio too high.
C)Financial markets interpret the issuance of equity unfavorably.
D)All of these are sensible reasons to rely on internal funds.

Question

Quizplus · Accepted Answer

All of these are valid reasons for a firm to rely on internal funds. Equity issues can be costly, increasing debt could raise the firm's debt ratio too high, and financial markets may react negatively to the issuance of equity. Therefore, these factors may make it more advantageous for a firm to rely on internal funds instead of seeking external financing.

Which of the Following Is NOT a Sensible Reason for a Firm