Cash raised for a business in exchange for an ownership stake is called which term?

• A. Pro forma
• B. Venture Capital
• C. Equity Capital
• D. Debt Capital

Answer: (C)

Equity capital is cash raised for a business in exchange for an ownership stake. This type of financing brings investors into ownership, so you don’t repay it like a loan. Instead, investors share in the company’s profits and losses and may gain voting rights, depending on the equity structure. This contrasts with debt capital, which is borrowed money that must be repaid with interest regardless of the business’s performance. Pro forma refers to projected financial statements, not a source of funds. Venture capital is a specific form of equity financing from specialized investors, but the general term for funds raised in exchange for ownership is equity capital.