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debt financing

Date: Mon, 02/15/2010 - 23:06

Submitted by anonymous
on Mon, 02/15/2010 - 23:06

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Total Replies: 3


External finance debt finance and internal debt finance - can someone tell their difference


Well I am not a finance expert,but as far as my knowledge is concerned external financing is used to describe funds that firms obtain from outside.Many kinds of external financing are there but the two main ones are equity issues, (IPOs or SEOs), but trade credit is also considered external financing.The firm often has to pay a transaction cost to obtain it,so external financing is generally thought to be more expensive than internal financing.
Whereas,debt finance is the source of funds which can be obtained from external funding agencies,which might include the issue of bonds, preference shares or term loans from financial institutions.
Internal financing consists mainly of profits retained by the firm for investment.
Hope this will help you.


lrhall41

Submitted by on Tue, 02/16/2010 - 03:09

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