In financing a loan, investment, or purchase for a service firm, which approach is suggested as non-recurring and to build a positive bank balance?

• A. Borrow from bank and use profits to repay
• B. Sell investments and issue shares leading to a positive bank balance and net profit
• C. Increase expenses to save cash
• D. Take a long-term loan and never repay

Answer: (B)

The key idea is to raise cash with non-recurring sources that don’t create ongoing costs. Selling investments converts assets into immediate cash, while issuing shares brings in cash from investors. Together, they boost the bank balance right away and increase equity, without creating regular debt service or persistent expenses. If the sale of investments yields a gain, that gain can also lift net profit, reinforcing the benefit to both liquidity and profitability from a one-off event. This approach is preferable for a one-off financing need because it improves cash reserves without committing the firm to ongoing obligations. The other options either introduce regular payments, reduce cash, or rely on impractical long-term debt without repayment.