Question

"If we examine the ratio of working capital to sales, we can see that for the last several decades, firms' liquidity has been increasing.

A True
B False"

Answer 1

When deciding whether to raise funds through borrowing or by issuing stock, the decision depends on several factors. Borrowing is a form of debt financing where the firm receives the needed capital in exchange for agreeing to repay the borrowed amount with interest. Issuing stock, on the other hand, is a form of equity financing where the firm sells ownership shares to investors in exchange for capital.

Step-by-step explanation:

When deciding whether to raise funds through borrowing or by issuing stock, the decision depends on several factors. Borrowing is a form of debt financing where the firm receives the needed capital in exchange for agreeing to repay the borrowed amount with interest. Issuing stock, on the other hand, is a form of equity financing where the firm sells ownership shares to investors in exchange for capital.

If you owned a small firm that needed a surge of financial capital for a major expansion, borrowing might be a more viable option. This is because borrowing allows the firm to obtain the necessary funds without diluting ownership or control. Additionally, borrowing from a bank can provide a more customized approach and the ability to build a relationship with the lender.