What is defined as money that comes from sources outside the enterprise?

• A. Internal financing
• B. External sources of finance
• C. Retained earnings
• D. Grants

Answer: (B)

The correct answer is that money coming from sources outside the enterprise is defined as external sources of finance. This refers to funds that an organization obtains from outside entities to support its operations, investments, or growth. These sources can include loans from banks, investments from venture capitalists, issuing shares to raise equity, or obtaining grants.

The emphasis on 'external' is significant as it distinguishes this type of finance from internal financing, which is generated from within the business, such as retained earnings or profits not distributed to shareholders. By understanding that external sources encompass a variety of funding options not originating from the company's own revenues, it becomes clear how vital they are for businesses seeking additional capital for expansion or operational needs. Therefore, recognizing the term's definition helps differentiate between the various means of financing available to enterprises.