Share capital is invested by whom, and what is its purpose?

Share capital is invested by whom, and what is its purpose?

• A. Invested by owners in a business and provides funds to buy capital goods
• B. Borrowed from banks for operations
• C. Revenue generated from sales
• D. Government grants received

Answer: (A)

Share capital is money invested by the owners or shareholders. It becomes part of the company’s equity and is used to finance long-term assets—the capital goods like machinery, equipment, and buildings that the business needs to operate and grow. Because it’s equity, this funding doesn’t have to be repaid as a loan; instead, owners share in the company’s profits and the potential appreciation of their investment. The other funding types mentioned would be borrowing (a loan, which is debt), revenue (money earned from selling goods and services), or grants (external funds that don’t involve ownership).

Share capital is money invested by the owners or shareholders. It becomes part of the company’s equity and is used to finance long-term assets—the capital goods like machinery, equipment, and buildings that the business needs to operate and grow. Because it’s equity, this funding doesn’t have to be repaid as a loan; instead, owners share in the company’s profits and the potential appreciation of their investment. The other funding types mentioned would be borrowing (a loan, which is debt), revenue (money earned from selling goods and services), or grants (external funds that don’t involve ownership).