Paper Critique



Paper Critique

Elaborate How the Paper Advanced Understanding of the Particular Issues.

This literature review focuses on the timing and financing within a capital structure used by a corporation. Firms are most likely to opt for equity financing especially when the market value of their shares is high. However, if it is the other way around, debt financing is mostly preferred by corporations as explained in the literature review. The equity financing is preferred in return of the investment that the shareholders made they receive the equivalent number of shares and ownership in the corporation. The equity financing is done when the corporation is seeking to raise more cash; the company desires to float more shares in the market, and the corporation desires to increase the market share by issuing and floating shares to the shareholders of other corporations. There are several advantages of equity financing for instance, the corporation does not have the direct obligation to pay back the invested amount to the shareholders with in a limited time period like in debt financing. Apart from that, the share holders become the owners and partners of the company and they share the profit and loss of the corporation. Moreover, the literature review also highlights another essential benefit of using equity financing, which is that no fixed liability on the company as compared to the debt financing. As there are advantages, there are some disadvantages of equity financing too. The literature review mentions the consumption of time and cost for raising funds through equity financing as a major drawback. Apart from that, the involvement of the shareholders in the decision making may potentially disturb then management of the corporation and its decisions is also a disadvantage. Moreover, investors will require the information relating to the corporation affairs in order to track ...