Money that a person or company raises from within to begin or expand operations. Internal funds often form a company's seed money; that is, one may start a company with one's own funding rather than with a loan or an IPO. There is a famous story that Ross Perot established Electronic Data Systems with $1,000 in personal savings; in this case, Perot's savings account contained internal funds. See also: Bootstrap, External funds.
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Funds that are raised within a firm. For example, income after taxes and noncash expenses, such as depreciation, provide a firm with funds to use in the acquisition of investments. Companies that are able to finance expenditures with internal funds are not required to rely on borrowing or the sale of additional shares of stock. Compare external funds.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.