Which statement about raising capital is true for corporations?

Which statement about raising capital is true for corporations?

• A. They can raise money by selling stock
• B. They cannot raise funds externally
• C. They have no liability protections
• D. They avoid taxes completely

Answer: (B)

Raising capital for corporations relies on external financing options, especially equity through selling stock and debt through bonds or loans. The statement that they can raise money by selling stock is true because issuing shares brings in cash from investors in exchange for ownership stakes, without requiring repayment like a loan. Corporations are separate legal entities that provide limited liability to owners, so shareholders are not personally on the hook for corporate debts. They can and do raise funds externally beyond the company’s own funds, including issuing bonds and obtaining bank financing. They also pay taxes at the corporate level, and dividends to shareholders can be taxed again at the individual level, so taxes aren’t avoided completely.

Raising capital for corporations relies on external financing options, especially equity through selling stock and debt through bonds or loans. The statement that they can raise money by selling stock is true because issuing shares brings in cash from investors in exchange for ownership stakes, without requiring repayment like a loan. Corporations are separate legal entities that provide limited liability to owners, so shareholders are not personally on the hook for corporate debts. They can and do raise funds externally beyond the company’s own funds, including issuing bonds and obtaining bank financing. They also pay taxes at the corporate level, and dividends to shareholders can be taxed again at the individual level, so taxes aren’t avoided completely.