Generally, managers of corporations prefer internally generated cash to finance their capital expenditures because:
I. They can avoid the discipline of the financial markets
II. The costs of issuing new securities are high
III. The announcement of new equity issue is usually bad news for investors
A) I only
B) II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Internally generated cash allows managers to avoid the scrutiny and discipline of financial markets (I), avoids the high costs associated with issuing new securities (II), and prevents the negative signal that new equity issues can send to investors (III).

Generally, Managers of Corporations Prefer Internally Generated Cash to Finance