question archive What kinds of companies are most likely to generate internal capital (i

What kinds of companies are most likely to generate internal capital (i

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What kinds of companies are most likely to generate internal capital (i.e., retained earnings and leverage) and why don't they have as much access to external capital (investors)?

 

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Financial institutions such as banks tends to generate more internal capital because they make profits from the money that they hold in their treasury and hence reinvest it in other ventures. They're different from the other types of companies because they do not depend on the production of goods to make profits, banks make profits from the interest earned from the borrowers after loans are rent to them.

 

Externals investment to financial institutions is mostly limited by the government policies. In most cases banks tend to have limited number of investors in the organization who are in charge of deciding the path the financial institutions will take to reach their established goals.

Step-by-step explanation

The operations structure of this financial institutions do not require any kind of external financing because they don't have many contracts with the external capital or investors. Their customers are normally the investors who are usually involved in the creating of important decisions in the organization and do not require any external capital or investors