What are the costs and benefits of financing from external and internal sources?

Solutions

Expert Solution

Benefits from internal financing sources are as follows-

A. Cost of finances are very less.

B. The terms and conditions are highly flexible in nature and they are providing the business with more flexibility.

C. They can be used as and when wanted.

Disadvantages of internal financing can be as follows-

A. Large projects cannot be funded

B. Loss on the part of shareholders on dividends.

C. They can be leading to loss of profit and opportunities if invested into the wrong projects

Benefits of external financing as follows-

A. Large amount of capital and finances can be raised through external financing.

B.finances can be raised for long period of time and they are also growth-oriented.

C. It helps in preservation of the resources of the company.

Costs of external financing as follows-

A. It can result into providing up with the ownership.

B.These external financing can also bear fixed rate of return and those will be interest payable.

C. They mostly have non flexible terms and conditions and they are putting a lot of restrictions.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

The sources of business financing for assets acquisitions come from either internal or external sources. Internal...

The sources of business financing for assets acquisitions come from either internal or external sources. Internal sources such as retained earnings are the cheapest but Scarce or not enough for large assets investments. External sources (debt and equity) are more expensive and corporations have to decide on how much debt and equity to use over time (known as capital structure). Understanding characteristics of debt and equity is a key challenge to financial managers and of great importance to corporations’ market...

Compare and contrast the differences between internal and external sources of financing. Provide examples of how...

Compare and contrast the differences between internal and external sources of financing. Provide examples of how businesses have used the different sources of funds to finance their operations or strategic goals.

Compare and contrast the differences between internal and external sources of financing. Provide examples of how...

What are the three sources/costs of corporate financing.

a. What are the internal and external benefits for the companies when they apply and comply...

a. What are the internal and external benefits for the companies when they apply and comply with some reporting standards (e.g:GRI Standards, or SASB)? b. Should publishing the Sustainability Report become mandatory for all of public listed companies (Tbk) in Indonesia or remain as voluntary?

2. What do you consider the best sources for internal and external marketing information? Cite sources...

2. What do you consider the best sources for internal and external marketing information? Cite sources and discuss the advantages and disadvantages of each.

Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds.

4. Debt (or leverage) management ratiosCompanies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds.1. Which of the following is considered a financially leveraged firm?a. A company that uses debt to finance some of its assetsb. A company that uses only equity to finance its assets2. Which of the following is true about the leveraging effect?a. Interest on debt is a tax...

What are the main external sources of information when considering financing and investing? Discuss in 150...

What are the main external sources of information when considering financing and investing? Discuss in 150 to 180 words

examine the trade-offs between the risks and the benefits of internal and external customers connecting from...

examine the trade-offs between the risks and the benefits of internal and external customers connecting from multiple locations on multiple devices to a banking computer, by addressing the following: identify and discuss the benefits for internal and external customers that might justify the risks. identify and discuss the benefits for the variety of locations that might justify the risks. identify and discuss the benefits for the various types of computing devices that might justify the risks. The initial posting should...

Answer questions as directly as possible. 1.) Define internal and external sources of liquidity. What is...

Answer questions as directly as possible. 1.) Define internal and external sources of liquidity. What is a material deficiency in liquidity? If a firm has a material deficiency in liquidity what should be reported in the management discussion and analysis? 2.) Indicate whether each of the following items would result in net cash flow from operating activities being higher (H) or lower (L) than net income. a. Increase in inventory b. Increase in accounts payable c. Amortization...

Subjects