Example of Internal Financing

A internal financing It exists when a company has or accounts for its activities with capital that is provided by its partners and shareholders, as well as those known as bonds.

Although all shareholders own a part of the company, the main shareholders are those who are empowered to manage the capital and make decisions.

It is convenient to separate the characteristics and differences that the shares have, the different types of shareholders, the bonds and the circumstances that surround them.

First.- We will talk about common shares, these shares belong to investors who acquire shares of type b and c, in which they have right to participations, but they do not have the right to vote or make decisions and in the event of bankruptcy or liquidation they may be exempt from utilities.

Second.- We will talk about the main or priority actions; These shares are owned by those known as main shareholders; These shareholders are the ones who are empowered to make decisions and manage the distribution of profits.

Third.- The bonds; these are the third source of internal financing a company has, and the participation they receive is even smaller than common shares.

Example of internal financing:

Internal financing takes place when the interested company uses the funds (the cost paid by shareholders for stocks and bonds) to make changes or investments.

It makes discretionary use of said capital, investing it for activities deemed necessary for the progress and well-being of the company.

By using the capital from the shares, you are exempt from rendering accounts to banks, lenders or other instance that provides money externally, and does not risk the properties of the company by mortgages.

In case of loss, internal financing has the same problem of losing a lot of capital and going bankrupt.

In the event that it goes bankrupt or there is an economic surplus, the main shareholders They are the ones who make the decision on how and to whom the profits will be distributed or who will absorb the lost.