What methods can a firm use to raise its capital?

A firm has multiple avenues to raise capital, and combining the issuance of bonds with both preferred and common stocks is one of the most effective strategies. By issuing bonds, a company can obtain debt financing, which allows it to raise funds while keeping ownership structure intact since bondholders do not receive equity in the firm.

Additionally, by issuing preferred stock, a firm provides investors with a fixed dividend, typically before common stock dividends are paid. This can attract investors looking for more stable returns while preserving the firm’s ability to reinvest in its operations. Common stock, on the other hand, allows the firm to raise equity capital and gain access to investor funds, which does not have to be repaid unless the company chooses to buy back the shares.

Using a mix of these financing options offers flexibility. It enables the firm to optimize its capital structure by balancing equity and debt, managing risk, and ensuring that it can fund operations and growth initiatives effectively. This approach can support a firm's long-term financial strategy, making the combined issuance of bonds and preferred/common stocks a comprehensive method for raising capital.