What type of business is most likely to obtain large amounts of resources by issuing share?

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BlackTom AI · Accepted Answer

Question restatement: What type of business is most likely to obtain large amounts of resources by issuing share?
Options analyzed:
- Proprietorship: This structure is typically funded by a single owner who uses personal funds or loans; it generally cannot issue shares to the public, and thus has limited ability to raise large resources through share issuance.
- Company: A company, especially a corporation, can issue shares to investors to raise substantial capital. This aligns with the concept of raising large resources by selling equity.
- None of the options given.: This would be chosen only if none of the listed business types could issue shares to obtain resources, which contradicts the standard understanding that corporations issue shares.
- Partnership: A partnership is usually funded by the partners’ contributions and may raise capital through additional partner contributions or loans, but it does not issue shares to the public and is not structured to raise large resources via share issuance in the same way a company does.

Reasoning about intended concept: The core idea is that issuing shares is a hallmark of capital-raising through equity, which is characteristic of companies (corporations) rather than sole proprietorships or partnerships. Proponents of corporate finance emphasize equity financing through stock issuance as a primary method for accumulating large amounts of capital.

Why Option 2 fits best: Since a Company (corporation) has the formal mechanism to issue shares and attract investment from multiple shareholders, it is the type of business most associated with raising substantial resources via share issuance.

Why the others are not correct: Proprietorship lacks the ability to issue shares and relies on personal funds or debt; Partnership typically relies on partner contributions and debt rather than issuing shares; None of the options given is not accurate because the company option correctly describes the common mechanism for large-scale equity financing.

BACC012 Week 8: Practice Quiz

What type of business is most likely to obtain large amounts of resources by issuing share?

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