What is the inner capital market?

The internal capital market is the method of allocation of capital and departments within a company that distracts money to other sections of the company. Unlike the external capital market, its own internal capital market of the company section on which it gives money, which increases control of the funds. One of the benefits of ownership of business units is that it is much easier to watch those who receive money, which can reduce the chances of fraud. Another advantage is that the department can change the allocation if the money is used incorrectly.

There are two types of capital markets: external and internal. With the external capital market, money is lent to external people and businesses that are not associated with the money -giving company. On the internal capital market, the money is sent to business units that the company owns, which usually increases control of funds if there are no ruthless employees trying to steal money. The annexing market earns money by charging interest on offMoney, while the internal market earns money through projects and money with money.

One of the advantages for using access to the inner capital market is that money is much easier to monitor than if money was used by entities outside the company. For example, the department can speak and check the expenses of a business unit to ensure the correct use of the money and can tell the unit how it can and cannot spend money. The department will also know exactly who is dealing with money and exactly where it goes, which can reduce the chances of fraud.

allocation may not be static with the internal capital market and rarely is. The allocation of money usually depends on how well the business unit is doing, which makes the department facilitating the remuneration of the successful Unje and limiting capital for unsuccessful units. For example, if a business unit is poor and cannot bring profits, then the allocation for this unit will decrease or zceLa stops. The money would then go to more successful units to help bring more money for society.

with an internal capital market may be needed by other workers who can increase costs. These special workers ensure that the money is correctly assigned and monitored. For large companies, this can increase the costs a lot, as many people may be needed to adequately monitor business units.