Question

Of the four sources of external funding for nonfinancial businesses, the least often used in the U.S. is

A) bank loans.
B) nonbank loans.
C) bonds.
D) stock

Answer 1

Stock issuance is the least often used source of external funding for nonfinancial businesses in the U.S. as companies tend to avoid the complexities and loss of autonomy involved with having shareholders and a board of directors. The correct option is D.

Step-by-step explanation:

Of the four sources of external funding for nonfinancial businesses, the least often used in the U.S. is stocks (D). Companies often prefer to maintain control over their operations rather than dealing with the demands of shareholders, hence they choose to borrow through banks, issue bonds, or reinvest profits first.

Selling stocks would mean a firm has to be accountable to a board of directors and its shareholders, which may be seen as a disadvantage for those seeking to keep autonomy over business decisions.