Final answer:
Jim Lightsey engaged in equity financing by selling stock to investors. In a hypothetical scenario, choosing between borrowing and issuing stock depends on the business's financial projections and willingness to share control. During the Civil War, the South raised funds primarily through selling war bonds.
Step-by-step explanation:
Jim Lightsey sold stock to investors in order to finance his company that operates an internet auction for sports memorabilia. Lightsey used equity financing. This type of financing involves selling shares of the company to investors, thereby raising capital in exchange for an ownership interest in the company.
Critical Thinking Questions: If you owned a small firm and needed a surge of financial capital for expansion, the decision to raise funds through borrowing or by issuing stock would depend on various factors. Borrowing (debt financing) requires repayments with interest, which can be a burden if the business doesn't generate the expected revenue. Issuing stock (equity financing) dilutes ownership but doesn't incur debt. The choice would involve analyzing the cost of borrowing, potential revenue, and how much control you're willing to share.
Exercise 16.3.5: During the Civil War, the South primarily financed its war effort through a. selling war bonds, not by seizing northern assets. This was a way to raise capital by borrowing from the public, where the government promised to repay the lenders with interest.