• Card 95 / 100: Explain why companies might want to raise outside funds, rather than financing any desired spending out of profits.

    Answer:
    A company might see an opportunity that it needs to seize quickly. For example, if a company thinks it can double its profits by building another $10 million factory, but only has $1 million in net income each year, it may want to raise the needed money from outsiders rather than wait (at least) ten years before expanding. Sample Partial Credit Answer A company thinks it can make more money.

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Capitalism: The Market Economy

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Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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