Advantages and Disadvantages of Common Stock

• Advantages

  • Places a minimum of constraints on the firm
  • Dividends are not required to be paid
  • No maturity date for repayment of funds
  • Increases the firm's borrowing power

• Disadvantages

  • Potential dilution of earnings and control
  • Potential negative signal to marketplace
  • High cost due to high risk

13-24

• 1994, HarperCollins Publishers

Copyright

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