Saturday, December 6, 2014

'Is equity capital free of cost'

Because of the following reasons equity capital is not free of cost.

  • Common stockholders can claim on the residual income of a company and have the right to interfere to the company's various internal matters.
  • If all the profit is distributed to the shareholders then the company needs to issue additional shares for financing. 
  • If the company decides to issue new shares then it will have to pay flotation cost.

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