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In: Finance

xternal Financing We examined two important topics in finance during this unit: external financing requirements and...

xternal Financing

We examined two important topics in finance during this unit: external financing requirements and agency conflicts. Address the prompts below in your essay.

Include an introduction that summarizes the main points with an example.
Critically reflect on the importance of external financing requirements. What key factors must be considered when determining external financing requirements?
Briefly describe the types of agency conflict, and provide an example of at least one of the types of agency conflict to support your response.

Your essay should be at least two pages in length, not counting the title and reference pages. You are required to cite and reference at least your textbook. Use APA format to cite in-text and reference citations.

Expert Solution

External Financing requirement.

The subject mentioned above is mostly attempt by the business when it required to pump in money or capital for operational cost for various reasons.

A simple define is a firm accruing or barrowing money from external source for general operations in simple term using fund from the external sources like banks and creditor, sometime accounts payables also considered as external financing because firm has to pay to an external parties, if payable crossing the assigned aging then it’s a source to utilize this in to company operation but remember it’s not going to cost free every transaction the firm has to pay some charges either way

Key factor for considering External Finance:

What you will do when you for running sort fund while doing business?

Obviously we go in search for lender who can save us by funding us immediately to cover our operation cost or expenditure to get work done and will return the fund once we received profit from the business.

So the external financing requirement play a vital roll in firms

Key factors of external finance

Short term loans and

Long-Term Debt

Preserving Your Resources

GROWTH

Advice and Expertise

AGENCY CONFLICT

Agency conflict is noting but conflict between firm owner and others can be managers or an external share holders.

there are different types of conflict

Under investment

Investment substitution

Remuneration

and so on going

for example:

Investment substitution:

shareholders Would have agreed with bond holders that the funds will be invested in low risk projects only but firm using it substituted with high risk projects, if this succeeds then there wont be any conflict, if not then the conflict arise and will go legal to solve it or Reimbursement

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