Financial Terms
External finance

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Definition of External finance

External Finance Image 1

External finance

finance that is not generated by the firm: new borrowing or a stock issue.



Related Terms:

Corporate finance

One of the three areas of the discipline of finance. It deals with the operation of the firm
(both the investment decision and the financing decision) from that firm's point of view.


External efficiency

Related: pricing efficiency.


External Financial Statements

Corporate financial statements that have been reported on by an external independent accountant.


External market

Also referred to as the international market, the offshore market, or, more popularly, the
Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors
in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: internal
market


Finance

A discipline concerned with determining value and making decisions. The finance function allocates
resources, which includes acquiring, investing, and managing resources.



Finance Company

Company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.


Internal finance

finance generated within a firm by retained earnings and depreciation.


External Finance Image 2

International finance subsidiary

A subsidiary incorporated in the U.S., usually in Delaware, whose sole
purpose was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid
to foreign bondholders not subject to U.S. withholding tax. The elimination of the corporate withholding tax
has ended the need for this type of subsidiary.


Offshore finance subsidiary

A wholly owned affiliate incorporated overseas, usually in a tax haven country,
whose function is to issue securities abroad for use in either the parent's domestic or its foreign business.



 

 

 

 

 

 

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