Because retained earnings are a form of internal financing, the dividend decision can significantly affect a firm's external financing requirements.

Question

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Retained earnings represent a source of internal financing for a company. The amount of retained earnings available for investment or distribution as dividends can impact a company's need for external financing to fund growth, capital expenditures, or other strategic initiatives. Therefore, the dividend decision can affect the external financing requirements of a firm.

Because Retained Earnings Are a Form of Internal Financing, the Dividend