To raise capital, corporations generally do which of the following?

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Multiple Choice

To raise capital, corporations generally do which of the following?

Raising capital for a corporation happens mainly by obtaining funds from investors through securities. The standard method is to issue and sell bonds or sell stock. Bonds are debt instruments; when a company issues bonds, it borrows money from investors and agrees to pay interest and repay principal at maturity. This brings in cash without giving up ownership, but it creates a liability. Stock issuance sells ownership shares to investors, providing equity capital; shareholders may receive dividends and enjoy price appreciation, but the company doesn’t owe fixed repayments and ownership is diluted. The other options aren’t about obtaining new external funds in the same market-driven way: hedging existing debt is about managing risk, not financing; improving efficiency boosts cash flow from operations but doesn’t raise new outside capital; borrowing from the government is not the typical primary method for private corporations.

Raising capital for a corporation happens mainly by obtaining funds from investors through securities. The standard method is to issue and sell bonds or sell stock. Bonds are debt instruments; when a company issues bonds, it borrows money from investors and agrees to pay interest and repay principal at maturity. This brings in cash without giving up ownership, but it creates a liability. Stock issuance sells ownership shares to investors, providing equity capital; shareholders may receive dividends and enjoy price appreciation, but the company doesn’t owe fixed repayments and ownership is diluted.

The other options aren’t about obtaining new external funds in the same market-driven way: hedging existing debt is about managing risk, not financing; improving efficiency boosts cash flow from operations but doesn’t raise new outside capital; borrowing from the government is not the typical primary method for private corporations.

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