17. Funds that are obtained from routine business transactions are known as . a.

Question

17. Funds that are obtained from routine business transactions are known as . a. spontaneously generated funds b. additional funds needed c. cash flows from financing activities d. internally financed funds e. financial feedback funds 18. Firms following the constant payout ratio dividend policy: a. will have a stable dividend payment when earnings fluctuate. b. will have a fluctuating dividend payment when earnings are stable. c. will have a higher cost of equity when earnings are stable compared to other similar firms. d. will have a lower cost of retained earning when earnings are volatile compared to other similar firms e. will have a fluctuating dividend payment when earnings fluctuate.

Explanation / Answer

Requirement 17:

Funds from routine business transactions are the funds generated from normal operations in the ordinary course of business.

Correct Option is a) Spontaneously Generated Funds

Requirement 18:

Constant Dividend Payout Ratio means dividend will be paid at the constant payout ratio i.e., payout ratio remains unchanged. Hence dividend payment shall be stable only when the earnings remain unchanged.

Correct Option is e) Will have a fluctuating dividend when earnings fluctuate.

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