Asked by Emmanuel Garcia on Apr 29, 2024
Verified
The chief executive officer (CEO) of a retailer of clothes plans to expand business into the accessories market.For this expansion,the CEO asks the chief financial officer (CFO) of the company to calculate the amount of funds the company will have to borrow from the bank.Which of the following types of funding is the CEO planning to obtain?
A) Factoring
B) Trade credit
C) Equity capital
D) Debt capital
Debt Capital
Funds borrowed by businesses to finance their operations or growth, which must be repaid to lenders with interest.
Equity Capital
Funds that are raised by a company in exchange for a share of ownership in the company.
Factoring
A financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.
- Determine the range of short-term and long-term financing alternatives and evaluate their appropriateness for diverse situations.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
D
Explanation :
The CEO is planning to obtain debt capital, as borrowing funds from the bank involves taking on debt that the company will need to repay in the future, typically with interest. This is different from equity capital, which involves raising funds by selling shares of the company, and from factoring or trade credit, which are methods of managing cash flow and credit with suppliers or through accounts receivable.
Learning Objectives
- Determine the range of short-term and long-term financing alternatives and evaluate their appropriateness for diverse situations.