There are two primary ways that capital is raised. Which of the following statements is (are) correct?
I. Capital is raised internally by using retained earnings.
II. Capital is raised externally by selling fixed assets.

Question

There are two primary ways that capital is raised. Which of the following statements is (are) correct? 
I. Capital is raised internally by using retained earnings.
II. Capital is raised externally by selling fixed assets.

Quizplus · Accepted Answer

Statement I is correct as capital can be raised internally by using retained earnings, which is the profit that a company chooses to keep instead of distributing as dividends. 
Statement II is incorrect as capital is not typically raised by selling fixed assets, which are already owned by the company and are not a source of new funds. Instead, capital can be raised externally through debt financing (e.g. borrowing money through issuing bonds) or equity financing (e.g. selling shares of stock to investors).

There Are Two Primary Ways That Capital Is Raised