Final answer:
The availability of information about a firm's financials makes it easier for external investors to provide financial capital, even if they do not personally know the management. This is due to reduced concerns about imperfect information, making them more willing to invest.
Step-by-step explanation:
The question pertains to the fact that as a firm becomes established and its strategy seems likely to be profitable, the importance of personally knowing the management team diminishes. This change is due to the increasing availability of information about the company's products, revenues, costs, and profits that is shared with various external users, including investors and creditors.
The sharing of this information helps mitigate issues of imperfect information, a term that refers to the situation where there is an information asymmetry between buyers and sellers in a market. Imperfect information can lead to challenges in raising financial capital because external investors typically have less information than the firm's managers.