IGNOU ECO 1 2026 2027 - Discuss the various methods of raising finance for business ente

Question

Discuss the various methods of raising finance for business enterprises.
Explain the factors that influence the choice of financing methods.

06 Aug 2026

Answer :

Word Count : 638

Business enterprises require finance to start operations, purchase assets, meet working capital requirements, expand activities, adopt new technology and manage unexpected financial needs. The choice of finance depends on the nature, size and objectives of the enterprise. Business finance can be raised through various internal and external sources. One important method is owner’s capital or equity finance. In a sole proprietorship, the owner invests personal savings, while in a partnership, partners contribute capital according to their agreement. Companies can raise equity by issuing shares to investors. Equity finance does not normally create a fixed obligation to repay the capital, but ownership and control may be shared with shareholders. Another method is retained earnings. A profitable enterprise may retain a portion of its profits instead of distributing the entire

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