Page 438 - Business Principles and Management

Chapter 16 • Financing a Business

the role of investors in managing the business. To raise equity capital, therefore,
a business owner must estimate whether it will be more advantageous to remain
a sole owner or to form a partnership or a corporation. Eva Diaz must deal with
this question if she wishes to expand her Video Shoppe.

CHECKPOINT

How is equity capital obtained in each of the three types of
business ownership?

16.1 Assessment

UNDERSTAND MANAGEMENT CONCEPTS
Determine the best answer for each of the following questions.
1. Business owners’ personal contributions to the business are called
a. assets
b. equity capital
c. debt capital
d. stock
2. Which form of business ownership provides the greatest protection
of the owner’s personal assets in case of business failure?
a. sole proprietorship
b. partnership
c. corporation
d. None of the ownership forms provides protection of an
owner’s personal assets.

THINK CRITICALLY
Answer the following questions as completely as possible.
3. Why would an owner of a business want to use equity financing
rather than debt financing to raise money for a business?
4. What information would you want from a business before you
decided to invest your money as a new partner?
As a new stockholder?

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