Question

What are the benefits of the issue of shares?

Answer 1

The benefits of the issue of shares are:

1) As company require money for their investment as well as for working capital for executing day to day activities. The more debt raise by company lead to reduce in credit rating for the company and leads to increase in interest rate for the company lead to increase in interest cost which lead to unstablize the company financial. The issue of shares lead to reduce the debt for the company.

2) Help in Liquidation for the company during the time of economy downtime and decline in company business.

3) During the time of acqusition of other company the share will be used for acqusition instead to acquire by cash in hand by the company which further reduction in liquidation.

4) For selling of business, if company is listed then P/E is always greater than 1 which help to raise the enterprise vale of the business and will help in selling the business more than actual price of the company.

5) Unlike the debt, selling of stock share the company don't have to be repaid back.

6) After issuing the share, there is no compulsion to pay divident to shareholder while in case of debt, the interest rate has to paid regularly.