The financial manager of a well-regarded book publishing firm wishes to buy a small Internet publishing company to provide an avenue for sale of its materials online. In order to raise the funds to make this purchase, the financial manager decides to sell more shares in the company. How is the financial manager raising funds in this case?

Question

Quizplus · Accepted Answer

The financial manager is raising funds by selling more shares in the company, which increases the company's equity by encouraging new owners to take a stake in the company. This does not increase the debt burden or decrease the equity to debt ratio of the company, as identified in options A and D. Option B is only partially correct, as increasing the value of shares held by existing owners is a potential outcome of selling more shares, but it is not the primary reason for the financial manager's decision.

The Financial Manager of a Well-Regarded Book Publishing Firm Wishes