BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Share Dilution When companies issue additional shares, it increases the number of common stock being traded in the stock market. For existing investors, too many shares being issued can lead to share dilution. Share dilution occurs because the additional shares reduce the value of the existing shares for investors.

Detailed explanation-2: -As debt increases, shareholders require higher returns since they face higher financial risk. This higher financial risk results from spreading the firm’s business risk over a proportionately smaller equity base.

Detailed explanation-3: -Shareholders are owners of the company whereas debtholders are lenders to the company. A debtholder is one who receives the same payment no matter how well an organization does. Debtholders are often an organizations bankers or bondholders.

Detailed explanation-4: -A company may issue stock for any reason, including to pay down its debt, subject to several considerations. The number of shares any corporation can issue are limited, but the overall amount can be adjusted by a shareholder vote.