Generally, managers of corporations prefer internally generated cash to finance their capital expenditures because

Question

Quizplus · Accepted Answer

Managers prefer internally generated cash because it allows them to avoid the discipline of financial markets and the high costs of issuing new securities. Additionally, announcing a new equity issue is usually seen as bad news by investors, which can negatively impact the stock price. Therefore, using internally generated cash gives managers more control over the financing of their capital expenditures and reduces the negative effects on investor sentiment.

Generally, Managers of Corporations Prefer Internally Generated Cash to Finance