Multiple Choice
Which of the following is a primary concern for a bank when lending funds to a business for the short term?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT a primary source of corporate debt financing?
A
Issuing bonds
B
Obtaining bank loans
C
Selling common stock
D
Issuing notes payable
Verified step by step guidance1
Understand the concept of corporate debt financing: Corporate debt financing refers to methods companies use to raise funds by borrowing, which creates a liability that must be repaid. Common methods include issuing bonds, obtaining bank loans, and issuing notes payable.
Analyze the options provided: Issuing bonds, obtaining bank loans, and issuing notes payable are all forms of debt financing because they involve borrowing money that must be repaid with interest.
Clarify the concept of selling common stock: Selling common stock is a form of equity financing, not debt financing. When a company sells common stock, it raises funds by giving ownership shares to investors, and there is no obligation to repay the funds.
Identify the correct answer: Since selling common stock does not involve borrowing or creating a liability, it is NOT a primary source of corporate debt financing.
Conclude the reasoning: The correct answer is 'Selling common stock' because it represents equity financing rather than debt financing.
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