Final answer:
People and businesses can deal with risk in four ways: seeking funds from early-stage investors, reinvesting profits, borrowing through banks or bonds, and selling stock.
Step-by-step explanation:
When it comes to dealing with risk, people and businesses have four options:
- Seeking funds from early-stage investors
- Reinvesting profits
- Borrowing through banks or bonds
- Selling stock
1. Early-stage investors: This involves getting funding from individuals or firms in exchange for a stake in the business. The advantage is access to capital without incurring debt, but the downside is the loss of ownership control.
2. Reinvesting profits: Businesses can use their own profits to finance growth and expansion. The advantage is retaining full ownership and control, but the disadvantage is the risk of not generating enough profits for reinvestment.
3. Borrowing through banks or bonds: This method involves borrowing money from financial institutions or issuing bonds. The advantage is access to a large amount of capital, but the drawback is the obligation to repay the loan or bond with interest.
4. Selling stock: Companies can raise funds by selling shares of stock to investors. The advantage is access to a large pool of capital, but the disadvantage is dilution of ownership and the need to share profits and control with shareholders.