How do corporations typically raise capital?

• A. Issuing shares of stock and selling bonds
• B. Withdrawing funds from owners' personal accounts
• C. Receiving government grants exclusively
• D. Collecting membership fees from employees

Answer: (A)

Verified step by step guidance

1. Understand the concept of capital raising: Corporations raise capital to fund their operations, expand their business, or invest in new projects. This is typically done through external sources rather than relying on personal funds or internal contributions.
2. Identify the common methods of raising capital: Corporations primarily raise capital by issuing shares of stock (equity financing) or selling bonds (debt financing). These methods allow them to access funds from investors or lenders.
3. Eliminate incorrect options: Review the provided options and rule out those that are not typical methods of raising capital for corporations. For example, withdrawing funds from owners' personal accounts is not applicable to corporations, as they are separate legal entities.
4. Analyze the role of government grants: While corporations may occasionally receive government grants, this is not a primary or exclusive method of raising capital. Grants are often specific to certain industries or projects and are not a general practice for all corporations.
5. Conclude with the correct answer: Based on the analysis, the most accurate and typical methods for corporations to raise capital are issuing shares of stock and selling bonds. These methods align with standard financial practices.