Using retained earnings for expansion is considered internal source of funding.

Yes, using retained earnings for expansion is indeed considered an internal source of funding. Here's a step-by-step explanation:

1. Retained earnings are the portion of a company's net income which is kept by the company instead of being paid out as dividends to shareholders.

2. This money is typically reinvested back into the company, either by developing new products, expanding into new markets, reducing debt, or buying back its own shares.

3. Therefore, when a company uses its retained earnings to fund expansion, it is essentially using its own generated profits. This is why it's considered an internal source of funding, as opposed to external sources of funding like loans or investor capital.

4. The advantage of using retained earnings for expansion is that the company doesn't have to incur debt or dilute ownership by issuing more shares. However, the downside is that it may not be enough to support large-scale expansion projects.

5. In conclusion, retained earnings can be a valuable internal source of funding for companies looking to expand, provided they have sufficient profits to reinvest.