State the disadvantages of share capital as a type long term financing.

      

State the disadvantages of share capital as a type long term financing.

  

Answers


Lellah
1. Shareholders may vote against company policies which are not beneficial to them but are in the company best interests e.g. withholding payment of dividends for investment.
2. a lot of formalities are required before raising ordinary shares capital and may not be suitable when there is an urgent need for finance e.g. floatation costs such as printing a prospectus, advertising expenses etc
3. Payment of dividend to ordinary shareholders is expensive especially when shareholders are widely distributed geographically.

Lellah answered the question on November 8, 2021 at 07:32


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