Which firms typically utilize new stock plans for raising equity?

Which firms typically utilize new stock plans for raising equity?

• A. Firms with no need for new equity capital
• B. Firms needing new equity capital
• C. Firms focused solely on debt financing
• D. Firms in liquidation

Answer: (B)

Firms needing new equity capital typically utilize new stock plans to raise funds necessary for their operations or expansion. When businesses require additional financing for activities such as purchasing new assets, funding research and development, or increasing working capital, they may choose to issue new shares. This method provides access to fresh equity financing without incurring additional debt, which can be advantageous, especially if a firm is already heavily leveraged. Issuing new stock can also attract investors who believe in the growth potential of the firm, thus enhancing the company's market presence and credibility. In contrast, firms with no need for new equity capital are less likely to issue new equity since they do not require additional funds for their operations or growth. Companies focused solely on debt financing would prefer loans or bonds rather than diluting their ownership structure by issuing shares. Lastly, firms in liquidation are typically not looking to raise new capital; instead, they are in the process of winding down their operations and settling debts, making equity issuance irrelevant in that context.

Firms needing new equity capital typically utilize new stock plans to raise funds necessary for their operations or expansion. When businesses require additional financing for activities such as purchasing new assets, funding research and development, or increasing working capital, they may choose to issue new shares. This method provides access to fresh equity financing without incurring additional debt, which can be advantageous, especially if a firm is already heavily leveraged. Issuing new stock can also attract investors who believe in the growth potential of the firm, thus enhancing the company's market presence and credibility.

In contrast, firms with no need for new equity capital are less likely to issue new equity since they do not require additional funds for their operations or growth. Companies focused solely on debt financing would prefer loans or bonds rather than diluting their ownership structure by issuing shares. Lastly, firms in liquidation are typically not looking to raise new capital; instead, they are in the process of winding down their operations and settling debts, making equity issuance irrelevant in that context.