Which of the following is considered an external source of funds for a company?a.Sale of common stockb.Depreciationc.Loan repaymentd.Retained earnings
Question
Which of the following is considered an external source of funds for a company?a.Sale of common stockb.Depreciationc.Loan repaymentd.Retained earnings
Solution
The external source of funds for a company from the options provided is a. Sale of common stock.
Here's why:
a. Sale of common stock: This is considered an external source of funds because it involves raising capital from outside investors. When a company sells its common stock, it is essentially selling a piece of the company to outside investors.
b. Depreciation: This is not a source of funds at all. It is an accounting method used to allocate the cost of a tangible asset over its useful life.
c. Loan repayment: This is not a source of funds, but rather a use of funds. When a company repays a loan, it is sending money out of the company, not bringing it in.
d. Retained earnings: This is considered an internal
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