Discuss the typical financing strategies used by businesses?

Strayer fin 100 quiz 8 week 10 (chapter 15 & 16)

Businesses use many financing methods to finance their capital needs. There are three types of financing that businesses commonly use: equity financing, debt financing and leasing.

When a company borrows money from other sources, such as banks and financial institutions to finance operations or investment funds, it is called debt financing. Equity financing involves issuing shares of the company’s stock in exchange for funds; this allows them to raise capital without incurring additional debt obligations. Lastly, leasing is an arrangement where the firm agrees to pay for the use of certain assets over time – usually with little or no upfront costs.

The size, nature and risk tolerance of the company as well as access to the credit market and its ability to borrow will all influence the type of strategy that is chosen. However, each of these strategies may be effective in helping businesses achieve their long-term and short-term financial goals.

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