Describe and explain the three principle methods of financing used by corporations.

What will be an ideal response?


Corporations raise funds by selling stocks, selling bonds, and reinvesting profits. A share of stock is a form of ownership in the firm and entitles the owner to a share of future profits. A person who buys a bond from a firm is lending the firm money. Finally, if the firm earns profits, it can use some of them for investment rather than pay them all out to stockholders as dividends.