The cost of internal equity is cheaper than the cost of external equity.Which of the following statements is/are correct?

Question

Quizplus · Accepted Answer

Statement I is correct because internal equity refers to the cost of financing from within the organization, such as retaining earnings or issuing stocks to existing shareholders, which typically has lower costs than obtaining external financing. Statement II is incorrect because external equity refers to the cost of financing from outside the organization, such as issuing stocks to new investors, which typically has higher costs than internal financing.

The Cost of Internal Equity Is Cheaper Than the Cost