Question

Financing transactions that affect both cash and equity fall into three main categories:

Answer 1

Financing transactions that affect both cash and equity can be divided into three main categories: raising funds from early-stage investors, reinvesting profits, and borrowing through banks or bonds.

Step-by-step explanation:

Financing transactions that affect both cash and equity fall into three main categories:

1. From early-stage investors: When small firms are just starting out, they often raise funds from private investors who believe in the potential of the business.
2. By reinvesting profits: As a business grows and becomes profitable, it can use its earnings to finance future projects and expansion.
3. By borrowing through banks or bonds: Companies can borrow money from banks or issue bonds to raise capital for long-term needs.

When business owners decide on the sources of financial capital, they are also deciding on how to repay the funds.