As one of the directors of a company you have decided to set up a new branch at an estimated - Business Studies - Sources of Business Finance

Question

As one of the directors of a company you have decided to set up a
new branch at an estimated cost of Rupees five crores Your
suggestion is to raise the required amount by issuing equity shares
How will you convince the board with this regard?

Shvetika Sharma · Accepted Answer

Dear student,
The Directors can be convinced by explaining to them the benefits
of equity shares The following are some of the benefits of equity
shares:
1 It is a permanent source of capital such that the it remains
invested in the business till the liquidation of business
2 There is no obligation on part of the company to pay dividends to
equity holders
3 With equity shareholders there would be democratic management in
the company
4 It does not bring about any charge on the assets of the
company
5 It raises credit worthiness of the company

As one of the directors of a company you have decided to set up a new branch at an estimated cost of Rupees five crores. Your suggestion is to raise the required amount by issuing equity shares. How will you convince the board with this regard?