ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To create and investment opportunity into other businesses.
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To increase employee cooperation and an operating level.
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To be traded individually
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To raise money for economic investment and to fund operating costs
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Detailed explanation-1: -The primary benefit of raising equity capital is that, unlike debt capital, the company is not required to repay shareholder investment. Instead, the cost of equity capital refers to the amount of return on investment shareholders expect based on the performance of the larger market.
Detailed explanation-2: -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-3: -Regardless of the source, the greatest advantage of equity financing is that it carries no repayment obligation and it provides extra capital that a company can use to expand its operations.
Detailed explanation-4: -They may raise funds to finance their operations or new investments by raising capital through selling stock or issuing bonds. Those who buy the stock become the firm’s owners, or shareholders. Stock represents firm ownership; that is, a person who owns 100% of a company’s stock, by definition, owns the entire company.
Detailed explanation-5: -To avoid Debt – The primary reason for issuing shares is to avoid debt. Stocks help companies in raising capital without taking any burden in the form of debt.