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Corporate Finance

How does a growing firm raise its next dollar?

Follow internal cash, venture rounds and public offerings to see who owns what and what raising money costs. Solve has 10 questions on ownership, IPO costs, allocation and net proceeds.

The financing gap · Step 1 of 12

Start with the cash already inside the firm

Cash needed and financing available
02.557.510$ millionInvestInternalGapFinance
Cash amounts; closed steps are shown as zero
Fablewing Instruments is a fictional growing business. Internally generated cash is operating cash flow less dividends, and it can pay for investment. Investment less that internal cash is the financial deficit; a negative deficit is a surplus.
Try it: Move investment and dividends. Find when internal cash is enough.
Investment ($)$9M
Dividends paid ($)$1M
Internal cash
$6M
Cash gap
$3M
Position
Deficit
Operating cash flow is $7,000,000. Internal cash = operating cash flow − dividends.
Internal cash = (7,000,000 − 1,000,000) = $6,000,000.
Financial deficit = investment − internal cash.
(9,000,000 − 6,000,000) = $3,000,000: deficit.
Check yourself
Investment is $900 and internal cash is $700. The financial deficit is…

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