The two basic sources of equity are:

Question

Quizplus · Accepted Answer

Equity consists of two basic sources - paid-in capital and retained earnings. Paid-in capital refers to the amount raised by a corporation by issuing and selling its shares of common and preferred stock to investors. Retained earnings are the profits that are not distributed as dividends but are kept by the company to fund future growth opportunities or pay off debts. Therefore, option C is correct as it states the correct sources of equity. Option A is incorrect as bonds represent debt and not equity, and option B is incorrect as preferred stock is a type of equity, not a source of equity. Option D is also incorrect as loans from banks represent debt, not equity, and gifts from donors are not a primary source of equity for a corporation.

The Two Basic Sources of Equity Are