What are the pros and cons of using common stock for companies to raise funds

Common stockThe advantages and disadvantages of financing are as follows:

Advantages of Common Equity Fundraising:

1. Ordinary ** does not have any expiration date, and the funds raised are the permanent capital of the company, which needs to be repaid unless the company is liquidated. Therefore, common equity is the most stable capital in the company's capital**, which is essential to ensure the company's minimum capital requirements and promote the company's long-term sustainable and stable operation.

2. The Company did not pay an ordinary dividend.

obligations. This allows companies to act on a case-by-case basis: when there is a large profit, or when there is a surplus but the funds are scarce, or when there is a more favorable investment opportunity, the company can pay less or stop paying dividends on common stock.

Third, the use of common shares to raise funds is less risky. Since common stock does not have a fixed maturity date and does not have to pay fixed interest, there is virtually no risk of non-payment of principal and interest.

4. The issuance of common shares to raise funds is the financing of the company's sovereign capital, which can protect the company from creditors and preferred shares.

The various restrictions imposed by shareholders on the company's operation ensure the flexibility of the company's operation.

Disadvantages of Common Equity Fundraising:

1. The cost of raising common stock is high.

Second, the use of common shares to raise funds is easy to dilute the participation of the company's original shareholders.

3. The issuance of new ordinary shares** may be regarded as a negative signal by investors, resulting in ****. **。

1. Advantages of debt financing:

1. Low capital cost.

2. Able to obtain financial leverage.

3. Guarantee the owner's control over the enterprise.

Disadvantages of Debt Financing:

1. High financial risk.

2. There are many restrictions.

2. Advantages of common stock financing:

1. There is no need to repay the principal.

2. There is no fixed interest burden and low financial risk.

3. It can enhance the strength of the enterprise.

Disadvantages of Common Equity Fundraising:

1. The cost of capital is high.

2. Control is easy to disperse.

Ordinary ** does not have any expiration date, and the funds raised are the permanent capital of the company, which needs to be repaid unless the company initiates liquidation proceedings; Therefore, common equity is the most stable capital of the company, which is essential to ensure the company's minimum capital requirements and promote the company's long-term sustainable and stable operation.

1) Low financing risk; Because there is no fixed maturity date for ordinary **, there is no need to pay fixed interest, and there is no risk of not being able to repay principal and interest;

2) Financing can improve the visibility of the enterprise and bring a good reputation to the enterprise; The issuance** raises sovereign funds; common equity and retained earnings form the basis for the company to borrow all debt; With more sovereign funds, it can provide creditors with greater protection against losses; Therefore, the issuance of ** financing can not only improve the company's creditworthiness, but also provide relatively strong support for the use of more debt funds;

3)**The financing is permanent, has no maturity date, and does not need to be returned; It can be used for a long time during the company's continuous operation, which can fully guarantee the company's production and operation demand for the use of funds;

4) No fixed interest burden; When the company has a surplus and deems it suitable to distribute dividends, it can be distributed to shareholders; If the company has a small surplus, or has a surplus but is short of funds or has favorable investment opportunities, it can consider paying less or not paying dividends;

5) Financing is conducive to helping enterprises establish a standardized modern enterprise system.

2. Disadvantages of common equity financing.

1) Higher cost of capital; First, from the investor's point of view, investing in common stocks is more risky, and correspondingly requires an equally high rate of return on investment. Second, in terms of financing, dividends on common shares are paid out of after-tax profits and are not tax deductible. In addition, the issuance of common shares is also relatively expensive;

2) **The financing listing time span is relatively long, and the competition is very fierce, which cannot meet the urgent financing needs of enterprises;

3) easy to decentralize control; When an enterprise is issuing new shares, the introduction of new shareholders will lead to the dispersion of control of the company;

4) The new shareholders share the surplus accumulated before the company does not issue new shares, which will reduce the net income of ordinary shares, which may cause the stock price to rise.

Advantages of Common Equity Fundraising:

1. Form a stable long-term occupied capital. It is beneficial to strengthen the company and provide a basis for debt financing.

2. The risk of capital use is small, and there is no fixed maturity date for share capital, and there is no need to pay fixed interest.

3. The amount of financing is relatively large.

Disadvantages of Common Equity Fundraising:

1. The financing cost of common shares is high.

2. The use of common shares to raise funds is easy to dilute the participation of the company's original shareholders.

3. The issuance of new common shares** may be regarded as a negative signal by investors, resulting in ******.

Advantages of common stock financing: 1. There is no fixed dividend burden for common stock financing; 2. The common share capital does not have a fixed maturity date and does not need to be repaid, it is the permanent capital of the company, unless the company is liquidated; 3. Reason: The risk of raising common shares is small. Since the common share capital does not have a fixed maturity date, there is generally no need to pay a fixed dividend, and there is no risk of repayment of principal and interest; 4. The issuance of ordinary shares to raise equity capital can enhance the company's reputation.

Disadvantages of common equity financing: 1. Higher cost of capital; 2. The use of common shares to raise funds, **new**, and the addition of new shareholders may disperse the control of the company; 3. If new ordinary shares are issued in the future, it will lead to a decrease in the company's stock price.

Advantages of common stock fundraising: It is conducive to strengthening the company. Disadvantages of common equity fundraising: higher cost; It is easy to dilute the participation of the original shareholders of the company.