Final answer:
The external sources of cash for a business are cash inflows from investing activities (b) and financing activities (c). This includes activities such as obtaining funds from early-stage investors, borrowing through banks or bonds, and selling stock. Reinvesting profits is an internal source and not external. Option D is correct answer.
Step-by-step explanation:
External sources of cash for a business include cash inflows that come from outside of the company's regular business operations. The options presented for external sources of cash are: (a) Cash inflows from operating activities, (b) Cash inflows from investing activities, (c) Cash inflows from financing activities, and (d) Both (b) and (c). The correct answer would be (d) Both (b) and (c), as these involve sources outside the company's primary business operations.
External sources of cash can come from various avenues such as early-stage investors, which are typically involved in providing capital to start-up firms in exchange for equity. Another way is reinvesting profits back into the business to fund growth or expansion. This, however, is not an external source but rather an internal one.
External sources include borrowing through banks or bonds, which allows a company to obtain cash by taking out loans or issuing bonds to be repaid over time. Finally, selling stock or equity in the company yields cash from investors in exchange for ownership interests.
Choosing between these sources of financial capital requires firms to analyze the risk and return involved and align them with their financial goals. Some options might be more suitable during certain stages of business development or economic cycles, and others may bring about different financial obligations such as interest payments or dilution of ownership.