Central Valley Pharmaceuticals needs to raise funds to buy new production equipment. The financial manager would probably suggest that his company raise debt capital by ______.

Question

Quizplus · Accepted Answer

Borrowing money from a bank (or issuing bonds) is a common way for companies to raise debt capital, as it allows them to access large amounts of funding while generally maintaining control of their ownership structure. Selling stock (option B) would raise equity capital, which might dilute the ownership stakes of current shareholders, while using accumulated earnings (option A) would reduce the company's cash reserves. Selling marketable securities (option C) might not generate enough funds to finance a large capital investment in equipment.

Central Valley Pharmaceuticals Needs to Raise Funds to Buy New