Q.Correct the underlined word and rewrite the following sentence.
Retained earnings is an
external
source of finance.

The term is Retained earnings (also called ploughing back of profits) — the internal source of finance in which a company reinvests a part of its own undistributed profits.

Sources of corporate finance are broadly classified as external (shares, debentures, deposits, loans) and internal. The internal source is the profit that a company earns but does not distribute as dividend — it is retained and reinvested in the business.

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The underlined word external is wrong; the correct word is internal. Corrected sentence: Retained earnings is an internal source of finance.

Retained earnings are the part of a company’s net profit that is not distributed as dividend but is ploughed back into the business.

• Because these funds are generated from within the company’s own operations, they form an internal source of finance (also called ploughing back of profits or self-financing). …