A firm needs external financing to support increases in operations if:
A) the firm is operating at full capacity.
B) the firm is accounting for a very less amount of financing feedbacks.
C) the firm has a large amount of spontaneously generated funds.
D) the firm is having economies of scale.
E) the firm is operating at the breakeven point.

Question

Quizplus · Accepted Answer

If a firm is operating at full capacity, it cannot increase its operations without external financing. This is because all of its internal sources of funds have been fully utilized, and it needs to seek funding from external sources such as banks or investors.

A Firm Needs External Financing to Support Increases in Operations