Externality
Externality is an effect on the firm or the environment that are not reflected in the project's cash flows.
Definitions
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Externalities. Effects on the firm or the environment that are not reflected in the project's cash flows.
According to Principles of Economics by Timothy Taylor (3rd edition),
- Externality. When a market exchange affects a third party who is outside or "external" to the exchange; sometimes called a "spillover."
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
