Question

Which of the following methods for raising equity capital is not available to not-for-profit corporations?

A	Retained earnings

B	Government grants

C	Private contributions

D	Religious organizations

E	Common stock sales

Answer 1

There are generally two type of firm, investor owned firm and not for profit firm. The investor owned firms operate to earn profit and maximize the value of firm while not for profit firm operate to help societies for improve the standard.

Not for profit business can have one source of equity is retained earnings, but they do not have access to equity market. That is the not for profit companies cannot issue new shares to raise equity.

Major source of equity for not for profit corporation is mention below:

1. Government Grants

2. Charitable contributions

3. retained earnings

4. Religious Organization.

So, COmmon Stock Sales or raising equity capital is not available to not-for-profit corporations.

Option (E) is correct answer.