Karl Takes a Loan from a Reputed Bank to Set

question 172

Multiple Choice

Karl takes a loan from a reputed bank to set up a recording studio. Which of the following best represents Karl's source of finance?

• A) initial public offering
• B) revolving credit
• C) debt financing
• D) angel investment
• E) venture capital financing

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Definitions:

Equity

The value of an owner's interest in a property or business, calculated as the difference between the total assets and total liabilities.

Liabilities

Liabilities are obligations arising from past transactions expected to lead to an outflow of resources embodying economic benefits.

Accounting Equation

Represents the foundational principle of double-entry bookkeeping, stating that assets equal liabilities plus equity, serving as the basis for all accounting systems.

Liabilities

Financial obligations or debts that a company owes to others, which are recorded on the right side of the balance sheet.