What Is the Primary Drawback of External Equity

question 40

Multiple Choice

What is the primary drawback of external equity?

• A)External equity is expensive because it obligates the firm to pay dividends to shareholders.
• B)Issuing additional shares of stock reduces the earnings per share of the company and usually the value of its shares of stock.
• C)External equity is a complex and risky way to raise capital and is seldom used.
• D)Issuing additional shares of stock has to be approved by existing stockholders who often will not approve.