ENTREPRENEURIAL PLANNING
FINANCIAL PLANNING AND ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is a disadvantage of share capital?
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No interest repayments
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Cannot raise large amounts of finance
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Possible loss of ownership
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Unlimited liability
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Explanation:
Detailed explanation-1: -The main disadvantage to equity financing is that company owners must give up a portion of their ownership and dilute their control. If the company becomes profitable and successful in the future, a certain percentage of company profits must also be given to shareholders in the form of dividends.
Detailed explanation-2: -More Equity Share Capital issued means less utilization of trading on equity. As equity capital cannot be redeemed, there is danger of over capitalization. Investors desirous of investing in safe securities with fixed income do not go for equity shares.
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