Answer:
Hungry Kids
External Financing Need:
This is a need to finance the operations and investments of an entity as a result of high sales at a time when the entity cannot do so internally (from retained earnings) or from trade creditors.
Explanation:
External financing need arises when there is an increase in assets (as a result of the purchase of new equipment and property, uneven cash flow, to release equity, fund marketing campaigns, or replenish supplies) caused by higher sales level. This need is reduced by the immediate increase in liabilities. It can further be reduced by any increase in retained earnings.
Internal sources of finance are the sources of business finance generated within the business, mostly from existing assets or operational activities. On the other hand, external sources of finance are the arrangement of capital or funds from sources outside the business, especially through the issuance of debt or equity securities.
