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Because of these, financing hierarchy is created in which firms prefer internal financing toothers as internal financingcontains minimum financing costs. If internal financing is not sufficient or when external financing is necessary, the debt financing is further used as the next resort and equity financing is used as a residual. |
Thus, a financing hierarchy is created as companies prefer internal financing which involves minimal costs. If this is not sufficient, then external financing is necessary. Debt financing becomes the next option with equity financing as the last resort. Because: The paragraph is broken up into three sentences, increasing the clarity while reducing the word count. |
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