NOTE: According to company financial ability by checking advantages and disadvantages select which method is useful for the issue of additional capital.
COMMON STOCK;
Common stock is the ordinary stock issued by the company which forms a share in the owner ship in the company
Pros
Issuing a common stock is an alternative for the issuing a debt or preferred stocks
This policy is adopted when company is not interested to add to more debt in the balance sheet
And common stock does not have any binding like payment of dividend in a fixed rate whereas common stock can get an EPS based on company profitability
Corns
Issuing a common stock dilutes ownership in a company
And increases number of outstanding shares in the market or balance sheet
BONDS PAYBLE:
Bond payable is a traditional debt instrument
Where investor lends money to business which hold certain interest or dividend need to pay by the company
Procs
When business need cash for the taking new capital or new scope of business they use this debt instruments without diluting its ownership in the company, holders of debt instrument will not be part of decision making
Interest paid to the debt instrument will be considered as an expense to the company can used for tax deductions
Company can borrow money when it is required and with low interest rates than return on investments
Corns
There are certain regulations they’re to issuance of bonds as much as company wants
Interest on must be paid monthly irrespective of company performance etc
Bonds liability must be paid upon expiry of the bond terms irrespective of the company financial status
NOTES PAYABLE:
Notes payable is also called a promissory note
it’s a pledge to repay money
that document contain amount borrowed and interest they’re on
Pros
Its fits better with company financial situation and repayment can be designed according to the financial strengths
Generally repaid more than a year of issuing date
It don’t need approval from share holders
Corns
Its not useful for large company
using this approach company can get small and short-term
needs
where it holds lot of legal binding to the company for timely
repayment along with interest
You are in need of funds to expand your corporation, and three alternatives include issuing common...
You are in need of funds to expand your corporation, and three alternatives include issuing common stock, issuing bonds payable, and issuing a note payable. Discuss the pros and cons of each of these three choices. Determine the best choice for your corporation and explain why.
You are in need of funds to expand your corporation, and three alternatives include issuing common stock, issuing bonds payable, and issuing a note payable. Discuss the pros and cons of each of these three choices. Determine the best choice for your corporation and explain why.
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