Asked by Jessica Tufts on Apr 24, 2024
Verified
Team-All Pharmaceuticals needs to raise funds to buy new production equipment.The financial manager would probably suggest that his company raise debt capital by
A) using accumulated earnings.
B) selling stock.
C) selling marketable securities.
D) borrowing money from a bank.
Debt Capital
Capital raised through borrowing, typically in the form of loans or bonds, that must be repaid with interest.
Marketable Securities
Low-risk securities with short maturities.
Accumulated Earnings
The total amount of net income a company retains over its existence, not distributed as dividends to shareholders but rather reinvested in the business.
- Distinguish the numerous financing options available to firms and the ramifications of each choice.
Verified Answer
ST
Sarah Tchier6 days ago
Final Answer :
D
Explanation :
Borrowing money from a bank is a direct method of raising debt capital, which involves taking on a loan that the company is obligated to pay back with interest. Accumulated earnings (A) are internal funds, not debt. Selling stock (B) raises equity capital, not debt. Selling marketable securities (C) could generate cash but doesn't specifically raise debt capital.
Learning Objectives
- Distinguish the numerous financing options available to firms and the ramifications of each choice.