How do corporations raise money and resources to expand? Select three answers: A) They request a bank loan. B) They raise franchise fees. C) They cash in dividends. D) They agree to sell stocks. E) They issue bonds.

What the question is really asking

To expand, corporations need capital, meaning money they can invest in new buildings, equipment, workers, and operations. The main ways they get this capital are through debt (borrowing) and equity (selling ownership).

Choices that raise expansion capital

• A) They request a bank loan. This is debt financing. The corporation borrows money from a bank and repays it with interest.
• D) They agree to sell stocks. This is equity financing. The corporation sells shares to investors in exchange for cash.
• E) They issue bonds. This is also debt financing. The corporation borrows from bondholders and promises to pay interest plus repay the principal later.

Why the other options are not correct

• B) They raise franchise fees. Franchise fees are money paid to a franchisor by franchisees, and while they can be revenue for some businesses, this is not one of the core, general ways corporations raise expansion capital in basic corporate finance.
• C) They cash in dividends. Dividends are money the corporation pays out to shareholders, so paying or receiving dividends does not raise funds for expansion.

Quick check

If money is coming into the company (loan proceeds, stock sale proceeds, bond proceeds), it can fund expansion. If money is going out (dividends), it does not.