Question

Jacob and Harry are business partners in a company that manufactures portable solar panels. They initially started the business with their savings. However, now the company plans to expand its operations and the required amount of capital cannot be raised through savings or by reinvesting profits. Thus, the partners have decided to sell stock in their business to family members, friends, and employees. Which of the following sources of capital have Jacob and Harry planned to use for the expansion of their business?
A. Debt financing.
B. Bootstrapping.
C. Equity financing.
D. Mortgaging.
E. Factoring.

Answer 1

Answer:

C. Equity Financing

Explanation:

Based on all the details and financial steps that Jacob and Harry have undergone it seems that they are using Equity Financing. This type of financing refers to selling stocks of the company in order to raise capital, and making the investors partial owners of the company. Which is what Jacob and Harry seem to be doing by selling stocks of the company to family and friends in order to raise the capital they need to fund their business.

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