Question

Like many small businesses in the early stages, founder Jim Moon self-financed Moonworks. When the founder provides the primary funding for a small business, she or he is employing which form of financing?

A. Debt capital
B. Proceeds from sales of assets
C. Retained earnings
D. Sales revenue
E. Equity capital

Answer 1

E. Equity capital

Step-by-step explanation:

Since Jim Moon self-financed to establish Moonworks, the founder provides funds for her business. Therefore, it is her capital. It is called equity capital. As she does not take money from any bank or any friend, it is not debt capital. Again, as she starts the small business recently, she does not finance through the proceeds from sales of assets. Establishing a small business does not have any retained earnings or sales. Therefore, option E is the answer.