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

Quizplus · Accepted Answer

Capital can be raised internally by using retained earnings, which is the profits that are not distributed to shareholders as dividends but kept within the company for reinvestment. However, selling fixed assets is a way to generate cash flow, but it is not a method to raise capital as it does not increase the equity or ownership of the company. Therefore, statement II is incorrect.

There Are Two Primary Ways That Capital Is Raised