Final answer:
A firm in the introduction life-cycle stage will likely use capital to invest in growth-related assets or expansion, obtained through borrowing, issuing bonds, or selling stock. Issuing stock can be advantageous as it does not require scheduled interest payments but does dilute control over the company.
Step-by-step explanation:
Firm's Financial Capital Sources:
As a firm progresses through the introduction life-cycle stage, it will be more likely to use capital to balance the balance sheet. During this phase, firms often need to invest in growth-related assets to expand their operations and increase their market reach. Using capital, which can be obtained through various means such as borrowing, issuing bonds, or selling stock, provides the necessary funds for these investments without immediately impacting the firm's liquidity or financial stability.
Issuing stock is particularly appealing as it does not require the firm to make scheduled interest payments, but it does mean selling ownership and becoming responsible to a board of directors and the shareholders. When a firm opts for borrowing or issuing bonds, they maintain more control over the company, but they are committed to fixed payment schedules. Hence, choosing the right financial strategy is crucial for the success and growth of a firm, especially during its earlier stages of development.