Final answer:
When a company issues financial instruments to non-customers, such as bonds or stocks, the correct option is d) Liabilities increase. This is because the act of issuing these instruments adds to the company's obligations, representing external financing that increases liabilities on the balance sheet. Simultaneously, it corresponds to an increase in assets as the company receives funds or assets in exchange.
Step-by-step explanation:
When a company issues financial instruments to non-customers, it engages in external financing activities, typically in the form of bonds or stocks. In this scenario, the correct option is d) Liabilities increase. This is because the company is essentially taking on obligations to external entities, as these non-customers become creditors or shareholders holding the issued instruments. Liabilities encompass the company's financial obligations, and by issuing financial instruments, the firm is increasing its debt or equity-based liabilities.
This increase in liabilities is mirrored by a corresponding increase in assets, as the company receives funds or assets in exchange for the issued financial instruments. The assets side of the balance sheet reflects the resources owned by the company, and this augmentation represents the influx of capital resulting from the issuance. Therefore, the liabilities and assets sides of the balance sheet move in tandem, maintaining the fundamental accounting equation.
In essence, the act of issuing financial instruments is a strategic move by the company to raise capital for various purposes, such as funding expansion, covering operating expenses, or retiring existing debt. It signifies a financial transaction that impacts the company's leverage and financial structure, influencing its overall risk and solvency.