Finance and the capital markets

Companies need capital to launch, operate, and grow. In Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, capital raising is explained through several main paths: using profits the business keeps, borrowing money, issuing bonds, and selling stock. The source also explains that public and private companies differ in how much financial information they must share.

How companies raise capital

A company can fund itself internally or externally. Internal funding comes from money the business has already earned and kept. External funding comes from outside providers of capital, such as lenders or investors. According to Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, these choices shape both a company’s finances and its obligations to others.

1. Retained earnings

Retained earnings are profits a company keeps in the business instead of distributing them. This is an internal source of capital. The balance sheet example in Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 lists retained earnings as part of stockholders’ equity, showing how accumulated profits can become an important financing source over time.

• No need to borrow from outsiders.
• No interest payments are required.
• No new ownership shares have to be sold.
• Growth may be limited by how much profit the company has generated.

2. Loans

Companies can also raise capital by taking loans from banks or other lenders. This is debt financing. With a loan, the company receives cash now and agrees to repay it over time, usually with interest. In financial reporting terms, borrowed money appears as liabilities, which Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 shows on the balance sheet alongside other obligations.

• The company keeps ownership control.
• The lender expects repayment on a set schedule.
• Interest increases the cost of financing.
• Too much debt can weaken financial flexibility.

3. Bonds

Bonds are another form of debt financing. Instead of borrowing from one bank, a company can borrow from many investors by issuing bonds. Investors provide capital up front, and the company promises interest payments and repayment of principal at maturity. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 treats bonds as securities within the capital markets, where timely and truthful information matters because investors rely on disclosure when buying or selling them.

• Bonds can provide large amounts of capital.
• They do not give bondholders ownership in the company.
• The company still takes on repayment obligations.
• Because bonds are securities, disclosure and market trust are important.

4. Stock

A company can raise capital by selling ownership shares, or stock, to investors. This is equity financing. In return for their money, investors receive an ownership stake. Public stock trading takes place through markets such as the NYSE and NASDAQ, both discussed in Business Acumen for Strategic Communicators: A Primer, Ch. 7–9. The source also explains that companies may go public through an initial public offering (IPO) or, in some cases, through a direct listing. An IPO is used to sell shares and raise capital, while a direct listing lets existing shares begin trading without raising additional capital.

• Selling stock can bring in substantial capital.
• Unlike debt, stock does not require scheduled repayment.
• Ownership is shared with investors.
• Public listing increases scrutiny and disclosure obligations.

Public markets and capital raising

The capital markets connect companies that need money with investors willing to provide it. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 describes major stock exchanges such as the NYSE and NASDAQ, as well as OTC Markets for more speculative companies that do not meet exchange listing requirements. These markets help companies access investor capital and help investors buy and sell securities.

The source also notes that “Wall Street” is often used as a shorthand term for the stock market and financial community. This matters because public companies are judged continuously by investors, analysts, and financial media.

How public and private companies differ

Public companies

Public companies sell shares to the public and trade on securities markets. Because of that, they must provide more formal, regular disclosure. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 explains that the SEC oversees US public company reporting, while the Financial Accounting Standards Board develops GAAP, the accounting standards used in US financial reporting. Public companies must provide financial reports with consistency and transparency, and if they present non-GAAP measures, they must reconcile them to the comparable GAAP figures.

The source also discusses Regulation Fair Disclosure (Reg FD). This rule is designed to promote a balanced playing field by requiring that material information be shared broadly rather than selectively. Public companies may also use social media for disclosure if investors have been told those channels may be used.

Private companies

Private companies do not trade shares on public stock exchanges and generally face fewer public disclosure requirements. They may still raise capital through retained earnings, loans, private investment, or other arrangements, but they are not subject to the same level of ongoing market reporting described for public companies in Business Acumen for Strategic Communicators: A Primer, Ch. 7–9.

This means private firms usually have more privacy about their finances, strategy, and results. Outside audiences may know much less about them unless the company chooses to share information voluntarily.

Mars as an example of a private company

A private company such as Mars differs from a public company mainly in disclosure. Because Mars is private, it does not have the same public-market obligation to release the level of financial and operating detail expected from a listed company. By contrast, a public company must regularly disclose financial results and other material information under securities rules and accounting standards, as described in Business Acumen for Strategic Communicators: A Primer, Ch. 7–9.

So, while both public and private companies need capital and may use retained earnings or borrowing, only public companies must meet the extensive disclosure expectations tied to public investors and securities markets.

Key takeaway

• Retained earnings fund growth from profits kept in the business.
• Loans provide borrowed money that must be repaid with interest.
• Bonds let companies borrow from investors through the capital markets.
• Stock raises equity capital by selling ownership shares.
• Public companies face extensive disclosure and SEC-related reporting obligations.
• Private companies, such as Mars, generally disclose much less publicly.