Increased profits provide more internal funds to finance capital investments and a major factor in lenders' and investors' decisions to provide external funds to the firm.

Question

Quizplus · Accepted Answer

Increased profits are often seen as a positive indicator of a firm's financial health and future success, making it more attractive to lenders and investors looking to provide external funds. Additionally, increased profits provide the firm with more internal funds to finance capital investments, which can further improve long-term profitability and growth potential.

Increased Profits Provide More Internal Funds to Finance Capital Investments