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Multiple Choice
Imagine you own a startup company. How might you benefit from participating in the financial market?
A
By eliminating the need for financial statements
B
By avoiding all forms of external financing
C
By raising capital through issuing shares or bonds to investors
D
By ensuring your company is exempt from market regulations
Verified step by step guidance
1
Understand the role of financial markets: Financial markets are platforms where companies can raise capital by issuing shares (equity financing) or bonds (debt financing). This is crucial for startups that need funds to grow and expand their operations.
Learn about equity financing: Issuing shares allows a company to sell ownership stakes to investors. This provides the company with funds without the obligation to repay, but it does dilute ownership among shareholders.
Learn about debt financing: Issuing bonds enables a company to borrow money from investors with a promise to repay the principal amount along with interest over time. This method does not dilute ownership but creates a liability on the balance sheet.
Understand the importance of compliance: Participating in financial markets requires adherence to market regulations, such as reporting financial statements and disclosures. This ensures transparency and builds investor trust.
Recognize the benefits: By raising capital through financial markets, startups can access large pools of funds, improve their financial stability, and gain credibility in the business world, which can help attract more investors and customers.