What is defined as funds provided to a business from sources outside of it?

The correct answer is based on the understanding of finance sources in a business context. External finance refers to funds that are sourced from outside the business. This can include loans from banks, investment from venture capitalists, issuing stocks, or any other financial inflows that do not originate within the company's existing resources.

This concept is crucial for businesses, especially those looking to expand or invest in new projects, as it allows them to leverage resources beyond their immediate earnings or savings. External finance can provide the necessary capital to support growth but generally comes with obligations, such as repayment with interest or dilution of ownership, depending on the source.

In contrast, internal finance refers to funds generated within the business, such as retained earnings or profits that are reinvested rather than distributed to shareholders. Equity finance specifically pertains to capital raised through the sale of shares, and retained earnings are profits that have been reinvested in the business rather than distributed to owners. Each of these concepts is important for understanding the different methods a business can use to finance its operations, but external finance is distinct in aligning with the definition provided in the question.