Week 8 fin6301

External Financing Requirements and Agency Conflicts Student Name Institutional Affiliation Course Code Instructor Date External financing requirements and agency conflicts are common topics in business. External financing requirements are capital required by the organization beyond internal sources. External financing requires capital from various sources, including debt, equity, and others. On the other hand, agency conflicts can be defined as organizational differences that originate from different ideas of different organizational stakeholders, such as managers, creditors, shareholders, and others, leading to potential conflicts and suboptimal decision-making. For example, suppose company G wants to add manufacturing machines. In that case, it will look for external financing, maybe a loan from a bank, but the management team may be tempted to use these funds for personal gain rather than to maximize shareholder value, creating an agency conflict. Importance of External Financing Requirements Getting insight into external financing requirements is important for both businesses and investors. For businesses, accurately determining their external financing needs is crucial for securing the necessary capital to fund growth opportunities, finance investments, and maintain a healthy capital structure (Nguyen, 2020). Assessing growth and investment opportunities is a key factor in this process, as it helps businesses identify the capital required to capitalize on these prospects. Also, a thorough understanding of a company's current financial position and capital structure is essential in gauging its ability to raise additional funds and the most suitable financing options. Industry and market conditions play a significant role in shaping a business's external financing requirements. Factors such as competition, regulatory changes, and macroeconomic trends can significantly impact a company's access to debt and equity markets, as well as the cost of capital (Zein & Landström, n.d.). Investors, on the other hand, need to closely e...