A Business Can Obtain Financing by Issuing Stock or Borrowing

question 157

Multiple Choice

A business can obtain financing by issuing stock or borrowing from third parties,such as banks.What are the balance sheet effects of issuing stock to obtain cash?

• A)No effect on assets;Decrease liabilities;Increase stockholders' equity
• B)Increase assets;Increase liabilities;Increase stockholders' equity
• C)Increase assets;No effect on liabilities;Increase stockholders' equity
• D)Increase assets;Increase liabilities;No effect on stockholders' equity

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Definitions:

Securities Exchange Act

A U.S. federal law regulating the trading of securities, such as stocks and bonds, in order to protect investors from fraudulent practices.

Fraud

A deliberate deception to secure unfair or unlawful gain.

Privileged Information

Information that is confidential and protected from being disclosed, often due to its sensitive nature or legal protections.

Accountant

A professional who manages, audits, and prepares financial records and statements for individuals or organizations.