Money from within the firm or selling ownership is called what?

Money from within the firm or selling ownership is called what?

• A. Leverage (Debt) Ratios
• B. Liquidity Ratios
• C. Equity Financing
• D. Factoring

Answer: (C)

Raising capital by selling ownership shares is equity financing. This method brings cash into the firm by issuing stock or inviting investors, increasing the owners’ claim on future profits without creating a required repayment schedule. It can also involve using internal funds like retained earnings—money from within the firm—before seeking external equity. This contrasts with debt financing, which relies on borrowing and requires regular interest payments; liquidity ratios assess the ability to meet short-term obligations rather than how funds are raised; factoring involves selling accounts receivable for immediate cash.

Raising capital by selling ownership shares is equity financing. This method brings cash into the firm by issuing stock or inviting investors, increasing the owners’ claim on future profits without creating a required repayment schedule. It can also involve using internal funds like retained earnings—money from within the firm—before seeking external equity. This contrasts with debt financing, which relies on borrowing and requires regular interest payments; liquidity ratios assess the ability to meet short-term obligations rather than how funds are raised; factoring involves selling accounts receivable for immediate cash.