Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
Distinguish between internal and external sources of funds. Do corporations rely more on external or internal funds as sources of financing?
One of the most vital components for any corporation is working capital. Part of the reason for this, is because it is used as a way to help fuel their expansion efforts, while at the same time maintaining adequate cash reserves. This allows the company to grow at a steady pace and develop market share in the various segments for new products and services. Once this occurs, is when the firm can be able to rapidly expand in these areas and ensure that they have solid a foundation in doing this. Over the course of time, this will allow an organization to be able to establish itself and increase their overall profits margins for shareholders. During this process they will use both internal and external sources of funding. To determine which approach is more effective requires: comparing the two with each other and analyzing which one of them are being utilized the most. This will help us to understand when these various sources are used and how they can help an organization over the long-term.
The differences between Internal and External Sources of Funding
Depending upon: the size, philosophy and goals of a corporation; the underlying amounts of funding will vary from one firm to the next. As far as internal sources are concerned, this is when a company will raise money through areas within the company itself. A few of the most notable include: member / employee contributions, the sale...
These different elements are important, because these kinds of resources are often used by companies that are small and wanting limited amounts of financing. As, this is placing restrictions on: where the company is raising new capital and its overall focus on how to achieve various organizational objectives. (Groupelli, 2006, pp. 200 -- 214) ("Internal Financing Sources," 2011) ("External Financing Sources," 2011)
External resources are when a corporation is raising money through the public markets most notably: stock and bond offerings. In general, this kind of financing is often used as a way to help a firm be able to expand, even though it might not have the funds to do so internally. As, they will typically raise money through an: equity securities or debt initial public offering (IPO). This is when a company will sell common stock or some kind of bond to investors. The basic idea is that, the general public can provide the organization with the funds that it needs to be able to expand.
In exchange for investors loaning the company their money, they will receive some additional benefits that may not be offered with other asset classes. In the case of equity securities, investors are considered to be owners of the company and they share in the overall profits as well as dividends. Over the course of time, this will provide shareholders with a larger total return by allowing them to have two forms of compensation they are receiving. As far as…
Bibliography
Internal Financing Sources. (2011). Business Dictionary. Retrieved from: http://www.businessdictionary.com/definition/internal-sources-of-financing.html
External Financing Sources. (2011). Financial Dictionary. Retrieved from: http://financial-dictionary.thefreedictionary.com/External+Funds
Groupelli, A. (2006). Finance. New York, NY: Baron Books.
Internal and External Sources of Fund There are two type of funding companies utilizes to conduct business activities. Internal funding comes directly from the organization, and its owners. There many methods that internal funding can be achieved through, such as the owners putting the money into the company, selling of assets to raise capital, profits from the organization and depreciation of assets. External funding is achieved from other financial institutions, such
As shown in Appendix 2 these report gives a complete and detailed picture of candidate's personality type, classifying him to one of five main types: A-director, B - socializer, motivator, people person, C - thinker, analytic, D - supporter, X which means that personality has two types synergized. Interviewing as the most used employee screening skill Another very effective method of prospective employee evaluation is evaluation interview. Evaluation interview was a theme
These different elements show the overall nature of possible threats that could be facing a variety of organizations and how to mitigate them. This is important, because given the rapid changes in technology and the way various threats could occur, requires all entities to be watchful of different situations. Where, those who implement such strategies will be able to adapt to the various challenges that they are facing in
Analysis of California Pizza Kitchen Strengths and Weaknesses California Pizza Kitchen has been able to rise above the difficult economic conditions in their largest markets by concentrating on the most strategically important process areas first. At the center of their strengths, the chain has is the ability to support their global brand with a unique, branded dining experience (Fair Disclosure Wire, 2010). Creating the integration between a restaurant's global brand and
Internal Supply Chain at a Local McDonald's Description of the company from an Australian market perspective, the products offered in the store visited, and the supply chain in which the store operates The Australian McDonald's corporate Web site indicates that the company opened its first restaurant in an Australian suburb in 1971 and there are currently almost 800 McDonald's restaurants throughout the country, employing approximately 85,000 people (About us 2011). Although
Business Studies Strengths and Weaknesses of Kraft Foods Kraft Foods is a major U.S. firm that has undergone change in recent years. To assess the firms' current position, as well as look to the potential for future strategies, a common tool is a SWOT analysis. The SWOT analysis examine the firm and its environment, examining influencing factors by looking at the strength, weaknesses, opportunities and threats faced by the firm. This paper