ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Improving liquidity: An organization may issue shares to raise capital to improve liquidity. This will allow them to meet their short-term financial obligations and take advantage of business opportunities. Diversifying Ownership: Companies may issue shares to raise capital and diversify ownership.

Detailed explanation-2: -Some companies will decide to increase their share capital as an alternative to taking out a loan. The advantage being – there are no interest payments. Although dividends are often paid to shareholders, this depends on the success of the business and there is generally no obligation to pay dividends.

Detailed explanation-3: -Companies issue shares to raise money from investors who tend to invest their money. This money is then used by companies for the development and growth of their businesses.

Detailed explanation-4: -Companies issue stock for a variety of reasons. One reason is to raise capital. By selling stock, companies can generate cash that can be used to finance operations, expand businesses, or pay off debts. Another reason companies issue stock is to provide liquidity for existing shareholders.

Detailed explanation-5: -The money raised by issue of equity shares is called equity share capital. Equity share represent the ownership of a company and thus thus the capital raised by equity shares are also known as ownership capital or ownership funds.