Which statement about equity funding is correct?

Which statement about equity funding is correct?

• A. Can be used to raise working capital
• B. Investors have no say in management
• C. Equity funding has fixed repayment schedules
• D. Payments can be matched to seasonal sales

Answer: (A)

Equity funding means raising capital by selling ownership in the company to investors, and that money can be used to support working capital—the funds needed for day-to-day operations like paying suppliers, wages, and bills. Since investors own a stake in the business, they don’t have fixed repayment obligations; their return comes from profits or an eventual exit, not regular principal payments. This contrasts with debt financing, which uses fixed repayment schedules. Investors typically have some say in management through voting rights or board representation, so the notion that they have no influence isn’t accurate. Payments tied to seasonal sales or other variable schedules are also more characteristic of debt or revenue-based financing, not equity. Therefore, equity funding can be used to raise working capital.

Equity funding means raising capital by selling ownership in the company to investors, and that money can be used to support working capital—the funds needed for day-to-day operations like paying suppliers, wages, and bills. Since investors own a stake in the business, they don’t have fixed repayment obligations; their return comes from profits or an eventual exit, not regular principal payments. This contrasts with debt financing, which uses fixed repayment schedules. Investors typically have some say in management through voting rights or board representation, so the notion that they have no influence isn’t accurate. Payments tied to seasonal sales or other variable schedules are also more characteristic of debt or revenue-based financing, not equity. Therefore, equity funding can be used to raise working capital.