For the typical small firm, the primary source of equity capital for financing growth is
A) operating profits.
B) outside investors.
C) spontaneous debt financing.
D) retained earnings.

Question

Quizplus · Accepted Answer

Retained earnings are the portion of a company's profits that are kept (retained) by the company rather than paid out as dividends to investors. For small firms, reinvesting profits back into the business is often the primary source of equity capital for financing growth, as the firm may not have access to outside investors or be eligible for financing through traditional banks.

For the Typical Small Firm, the Primary Source of Equity