Final answer:
The inflow of cash from outside investors concerning a business is a part of the financing cycle. This cycle includes acquiring funds necessary for long-term investments and growth, which can come from various sources including early-stage investors, reinvesting profits, loans, or selling stock.
Step-by-step explanation:
When business owners obtain financing from outside investors, resulting in an inflow of cash into the company, this transaction is part of the financing cycle. The financing cycle involves raising financial capital needed for various projects and investments that can include purchasing long-term assets, such as machines or buildings, and funding new ventures or research and development.
Firms can acquire this financial capital in four main ways: from early-stage investors, by reinvesting profits, by borrowing, or by selling stock. These external sources of funds are crucial when the internal resources of the firm are not sufficient for the desired investments. As firms like General Motors or startup tech companies require funds to expand and invest in new projects, they often look to outside investors who are willing to provide financial capital with the expectation of future returns on their investments.
This relationship is vital to the growth and sustainability of businesses as they navigate the competitive markets and work towards increasing their business output and overall economic growth. Additionally, international flows of financial capital, such as investors purchasing real estate, companies, or stocks and bonds in another country, illustrate the global aspect of the financing cycle.