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MCQ Detailed View

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1 FINANCE MCQS

When companies start investing using internally generated funds, it shows that ____________?

  • The cost of loanable funds is high
  • The cost of loanable funds is low
  • Equilibrium is zero
  • Equilibrium is negative
Correct Answer: A. The cost of loanable funds is high

Detailed Explanation

When companies rely on internally generated funds for investment, it indicates that external borrowing is relatively expensive. High interest rates or borrowing costs make loanable funds costly, so firms prefer using their own resources to finance projects and operations.

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