Which of the following actions would raise equity capital for a corporation?

• A. Take a loan
• B. Sell bonds
• C. Issue stock
• D. Buy back stock

Answer: (C)

Raising equity capital means bringing cash into the company in exchange for ownership. The way to do this is by issuing stock to investors. When new shares are sold, cash increases and stockholders’ equity grows through the common stock account (and any additional paid-in capital); no obligation to repay the funds exists, unlike debt.

In contrast, taking a loan or selling bonds provides cash but creates a liability that must be repaid with interest, so equity doesn’t increase. Buying back stock uses cash to repurchase shares and reduces equity (treasury stock lowers total stockholders’ equity). Therefore, issuing stock is the action that raises equity capital.