Incredible eSales Corporation is a new Internet business. How can Incredible eSales obtain capital to finance its operations?

Question

What will be an ideal response?

Answer 1

Generally, to obtain capital, a corporation issues securities, principally stocks and bonds. A security usually represents either an ownership interest in a firm (stock) or a debt owed by the firm (bond). Some debt is also in the form of accounts payable and notes payable, which can, like bonds, be marketed to obtain capital. The two major types of stock are common stock and preferred stock.

Other possibilities include venture capital financing and private equity capital. Venture capital is provided by professional, outside investors, who often also offer managerial and technical expertise. In return for their capital and advice, these investors expect to be given some control over the financed firm's decisions. Private equity capital can come from a pool of investors who combine their funds. These investors often expect to buy an entire corporation, however, and reorganize it, selling off parts of the firm to pay debts.

Incredible E-Sales, or any business firm, can also obtain capital by borrowing against or selling some of its assets.