What term describes the additional financing a firm needs to support its operations?

The term that describes the additional financing a firm needs to support its operations is "External Financing Needed." This concept is critical in corporate finance because it addresses the gap between a firm's operational needs and its existing financial resources. When a company aims to grow, invest in new projects, or cover a shortfall in cash flow, it often finds that it does not have sufficient internal resources available.

External financing represents funds that must be obtained from outside the company, which can include equity, debt, or other financial instruments. It highlights the necessity for businesses to seek outside capital when internal resources are inadequate to meet their operational demands. Understanding this term helps businesses in financial planning and ensuring they have the necessary resources to sustain and expand their operations effectively.

The other terms do not specifically describe this need for additional financing. Internal financing refers to funds generated within the firm itself, debt capacity relates to the maximum amount of debt a company can borrow, and financial reserves indicate the amount of cash or liquid assets a business has on hand but do not inherently represent a need for additional financing.