When the business companies started investing with the funds generated internally is a point which shows that ____________?
Correct answer: A. cost of loanable funds is high
- A. cost of loanable funds is high
- B. cost of loanable fund is low
- C. equilibrium is zero
- D. equilibrium is negative
Explanation
Companies prefer internally generated funds when external borrowing is relatively expensive or difficult to obtain. This indicates a high cost of loanable funds rather than a low one.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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