Which of the following best describes a firm's external funding requirement?

Question

Quizplus · Accepted Answer

A firm's external funding requirement is essentially the amount of financing needed to cover the shortfall between what it needs for growth (in terms of assets) and what it can generate internally (through net income or retained earnings). This is calculated as the growth in assets minus the growth in current liabilities (which can finance some of the asset growth) minus the year's retained earnings (which is part of the net income that is not distributed as dividends and can also finance asset growth).

Which of the Following Best Describes a Firm's External Funding