Business, 31.07.2020 22:01 badaxz

Stocks are shares of ownership in a company. A stock certificate represents stock ownership. It specifies the name of the company, the number of shares owned, and the type of stock it represents. Today, stock is generally held electronically; that is, the owners don't get a paper certificate unless they specifically want to hold the certificates themselves. Please evaluate the following statements from the standpoint of the issuing company and the place each statement in the category of Advantages or Disadvantages Disadvantage
Advantages Dividends
1. Repaid
2. Shareholders
3. Future Buy Back
4. Net Profit After Taxes
5. One Vote Per Share

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Answer from: lexhorton2002

Advantages

Dividends

These are payments to shareholders as a way to share the profits the company has accumulated.

This is an advantage to the issuing company because they are usually not under any obligation to pay Dividends with respect to common Equity. As a result profits can be plowed back into the company to increase profitability.

Repaid

This refers to the fact that shareholders do not have to be repaid for their investment like debt holders are. Stock Holders bought a piece of the company instead of loaning money to the company so they do not have to be paid back. This is an advantage because it frees up Cashflow for the company as well as allowing it to maintain a better credit rating due to lower debts.

Future Buy-Back

This is a clause inherent in most shares. It means that the Issuing company can choose to buy back the stock at a given time in future.

This is an Advantage because it allows the Issuing company to regain control of the company at a future date.

Disadvantages.

Shareholders

Shareholders are people or entities who buy shares in the Issuing company. As such, they are owners in the company and have voting rights on decisions that the company makes. This is a disadvantage because it means loss of Independence for the company who now legally have to take the opinions of shareholders into account.

Net Profit After Tax

This is money that the company has after paying off interests and then taxes. This is the money that the company retains. Having shareholders means that a company may have to pay shareholders from this amount instead of retaining all of it thereby making it at a disadvantage to the Issuing company.

One Vote per Share

This means that every shareholder has a vote for every share they hold in the company. This means that Shareholders therefore have a say in the affairs of the company. This is a disadvantage to the Issuing company because it means a loss of Independence for them when decisions need to be made.

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