Question

Lecona, a start-up company, failed to acquire any major funding from potential investors. Therefore, the owners of the company set up their office in an unoccupied apartment owned by one of them. In this scenario, the company most likely incurred a(n) _____.

Answer 1

Lecona likely incurred a bootstrapping cost when they set up their office in a personally owned unoccupied apartment, a common practice in small businesses when external funding is unavailable.

Step-by-step explanation:

Lecona, a start-up company, most likely incurred a bootstrapping cost. Bootstrapping is a situation where a business owner utilizes personal funds or assets to support the company's operations. Since the owners of Lecona used an unoccupied apartment owned by one of them as an office, they avoided additional rental expenses and minimized initial capital costs.

Had Lecona received major funding from investors such as angel investors or venture capitalists, they might have had more resources to secure a separate office space. These investors typically provide capital in exchange for equity, along with potential experience and connections. Nevertheless, using personal assets as Lecona did is a common practice among small businesses that are unable to secure external funding or choose not to incur the obligations that come with loans or equity financing from investors.