Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following statements about raising capital for a new corporation is correct?

A new corporation can raise capital through issuing securities, borrowing, or owner contributions.

Corporations are not allowed to borrow money to raise capital.

Owner contributions are not considered a source of capital for corporations.

Issuing securities is the only way for a new corporation to raise capital.

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Verified step by step guidance

Understand the concept of raising capital for a corporation. Raising capital refers to the process by which a company secures funds to finance its operations, growth, or other business activities. This can be done through various methods, including issuing securities, borrowing, or owner contributions.

Evaluate the statement 'A new corporation can raise capital through issuing securities, borrowing, or owner contributions.' This is correct because corporations have multiple avenues to secure funding. Issuing securities involves selling shares or bonds to investors, borrowing involves taking loans from financial institutions, and owner contributions refer to funds provided by the founders or shareholders.

Analyze the statement 'Corporations are not allowed to borrow money to raise capital.' This is incorrect because borrowing is a common and legal method for corporations to raise capital. Loans and credit lines are frequently used by businesses to finance operations or expansion.

Examine the statement 'Owner contributions are not considered a source of capital for corporations.' This is incorrect because owner contributions are indeed a valid source of capital. Founders or shareholders often invest their own money into the corporation to provide initial funding or additional resources.

Review the statement 'Issuing securities is the only way for a new corporation to raise capital.' This is incorrect because, while issuing securities is a significant method, it is not the only way. Corporations can also raise capital through borrowing or owner contributions, as previously explained.