Final answer:
The correct answer is option d. The four basic sources of long-term funds for a business firm are long-term debt, common stock, preferred stock, and retained earnings. These are fundamental for business operations and future growth, as they determine the company’s financial structure and how it raises capital.
Step-by-step explanation:
The four basic sources of long-term funds for a business firm are: long-term debt, common stock, preferred stock, and retained earnings. Businesses need to access financial capital, which can be done by borrowing from banks or issuing bonds, both of which require fixed interest payments. Alternatively, a business can issue stock, selling ownership in the company to raise funds. However, this means becoming responsible to shareholders and potentially a board of directors. Retained earnings also provide a critical source of capital by reinvesting profits back into the firm.
Early-stage firms often face difficulties in raising financial capital due to their lack of demonstrated profit. They can choose from these four main ways of raising capital: early-stage investors, reinvesting profits, borrowing through banks or bonds, and selling stock. Each choice carries different implications for how the company operates and how it repays its financial backers.
Therefore, the correct option for the four basic sources of long-term funds for a business firm is option d) which includes long-term debt, common stock, preferred stock, and retained earnings.