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Meaning of financial economies of scale

 

 

 

Financial economies of scale

 

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Business glossary

 

Meaning of term financial economies of scale :

 

An economy of scale is where average cost falls as production increases. Economies of scale come about because larger firms are able to lower their unit costs. A financial economy of scale results from the ability of large firms to borrow money on better terms than smaller firms which makes the cost of financing investment lower. This may be because they are seen as a better risk by the financial institution or perhaps because they have access to more efficient ways of raising capital (e.g. equity markets).

 

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Financial economies of scale

 

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Meaning of term financial economies of scale

 

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