Final answer:
Selling ownership in a firm to raise funds is termed as equity financing, where stocks are issued, transferring part of the firm's ownership to investors. This contrasts with debt financing, where money is borrowed and must be paid back with interest, but allows owners to retain full control over the company.
"The correct option is approximately option 5"
Step-by-step explanation:
Selling ownership in a firm to raise funds is called equity financing. This practice involves issuing stock, which transfers a portion of the ownership of the company to the public.
When a firm decides to sell stock, it means the company is willing to share its profits and is adopting a method of fundraising that does not require regular interest payments like those incurred with debt. However, this also implies that the firm must yield some level of control to shareholders and become accountable to a board of directors. Equity financing is distinct from debt financing, which relates to borrowing funds typically through banks or bonds.
This method of raising capital means the firm must commit to scheduled payments and interest, irrespective of its income. Despite the commitment, a benefit of debt financing is that owners maintain complete control over the firm's operations without additional oversight from shareholders.