External Financing
Content
Definition
External financing is the process of raising capital from outside sources, such as loans, equity investments, or bonds, to fund business operations and growth.
Usage and Context
Companies often use external financing to get money for new projects or expansion. It`s key when they can`t fund these activities with their own money.
Frequently asked questions
- What is external financing also known as? External financing is also known as outside financing. It means getting money from external sources, not from within the company.
- Is loan capital an external source of finance? Yes, loan capital is an external source of finance. Businesses borrow money from banks or other lenders, which they need to pay back with interest.
- What is the external finance ratio? The external finance ratio measures how much a company relies on external sources for its funding. It compares outside financing to total capital.
Benefits
External financing can help businesses grow without using up their own funds. It also allows them to invest in big projects or expand operations.
Conclusion
External financing is a way for companies to raise money from outside sources. It helps them grow and invest in new opportunities without tapping into their own cash reserves.
