How can a company raise finance?

How can a company raise finance?

• A. From profits
• B. From share capital or debt capital
• C. From government grants
• D. From external loans

Answer: (B)

Raising finance for a company comes from internal funds or external sources. The strongest overall description here is funds raised through share capital or debt capital, because these are the two broad external avenues for getting new money into the business. Share capital means issuing new shares to investors, increasing the company’s equity base. Debt capital means borrowing money, such as bank loans or bonds, with a commitment to repay and usually interest. Using profits is an internal source—retained earnings that the business keeps rather than taking in new money from outside. Government grants can occur but are not guaranteed or universally available, so they aren’t a reliable general method for all companies. External loans are a form of debt capital, but focusing only on loans misses the equity route, making the combined idea of share capital or debt capital the most complete description of how a company can raise finance.

Raising finance for a company comes from internal funds or external sources. The strongest overall description here is funds raised through share capital or debt capital, because these are the two broad external avenues for getting new money into the business.

Share capital means issuing new shares to investors, increasing the company’s equity base. Debt capital means borrowing money, such as bank loans or bonds, with a commitment to repay and usually interest.

Using profits is an internal source—retained earnings that the business keeps rather than taking in new money from outside. Government grants can occur but are not guaranteed or universally available, so they aren’t a reliable general method for all companies. External loans are a form of debt capital, but focusing only on loans misses the equity route, making the combined idea of share capital or debt capital the most complete description of how a company can raise finance.