Which action would a mature, publicly traded company take to finance expansion?

• A. Issue additional shares
• B. Buy back all shares
• C. Declare bankruptcy
• D. Spin off subsidiaries

Answer: (A)

When a mature publicly traded company wants to fund expansion, it typically raises fresh capital by issuing additional shares. This equity financing brings in funds from investors without adding debt, which can support growth projects while keeping interest obligations lower and preserving cash flow. It can dilute existing shareholders’ ownership and earnings per share, but it avoids increasing leverage and can be attractive in favorable market conditions.

The other actions don’t fit as financing for expansion. Buying back shares reduces the number of shares outstanding and returns capital to shareholders rather than raising new funds. Declaring bankruptcy indicates insolvency and liquidation rather than financing growth. Spinning off subsidiaries restructures the company’s portfolio but doesn’t directly provide funds to expand the core business.