Okay, let's take both the class="cap">L et's situations one-by-one and find imagine that you want to out the advantages and start your own pizza shop. Now disadvantages with them.
starting the pizza shop would
Disadvantages
require some investment.
It is not very easy to take For example, you would be loan. In our example, if we want investing in equipments, land, to take loan from anybody, then furniture, food supplies etc. All the first thing we would be doing the money that you invest to is to convince the person that start your pizza shop business is his money is safe and we will be called as capital. Let's say, you able to return his money back. would be requiring the investment The person who is giving us loan of $2000 in order to start your would certainly be interested in pizza shop business.
knowing about the future plans of
But what will happen if you do the business and lot more not have the investment of $2000 things.
in order to start your pizza
Next, we will have to return shop? In that situation, you have all the money that we have taken 2 options.
as a loan with interest. This
You would take a loan from interest would increase as the somebody that need to be paid time passes. The more time we with interest. Or,
take to repay the principal
Issue stock (or share the amount, the more interest we ownership in the company) to would be paying.
people who may be willing to
Advantages
invest in your pizza shop in
You do not have to share the return for a proportional share ownership of the company.
of profits that your pizza
Issuing Stocks
generate.
Advantages
A company can raise more money 2,500 shares, while another may than it can borrow.
issue over a billion shares such
You do not have to make as IBM and Ford Motor periodic interest payments to Company.
your creditors.
The very first sale of stocks
And you do not have to make to the public is called Initial the principal payments.
public offering (IPO) and occurs
Disadvantages
on primary market.
You have to share your
Now all the shareholders can ownership with the other be benefited by 2 ways:
shareholders
1. When a company pays out
Your shareholders have the profits to the shareholder, the voice in company’s policies that money received is called a affects the company "dividend". The corporation's operation.
board of directors chooses when
So we can say that...
to declare a dividend and how
Companies sell stock (pieces much to pay.
of ownership) to raise money and
2. Or when performs well, provide funding for the expansion the stock price will go up and and growth of the business. The shareholders can sell their business founders give up part of stocks at a profit. This will their ownership in exchange for happen when more investors want this needed cash.
to buy stock in a company than
The total number of shares wish to will vary from one company to sell.
Debt seems to surround our modern life; we get up in the morning and put on clothes that we bought on credit, drive to work in a car that we borrowed money to buy, put petrol in our tank with a credit card, and spend 8-9 hours a day slaving away at work just so we can continue paying our ever-mounting stack of bills...
Have you ever found yourself going shopping just because you were feeling a little depressed and needed something to do If so, you are not alone — a recent survey showed that 74% of the world's consumers admit to having shopped for purely recreational reasons, even though they did not need to buy anything
How can shopping be a cure for the blues...
Buying a house is normally the largest and longest-term debt that the average Australian will incur in their lifetime This alone can make buying a home a daunting undertaking, especially if you are a first-time homebuyer It is very important that you understand some of the basics involved in taking out your first mortgage...
The term “credit” can mean a number of things, depending upon its application To an accountant, a credit is merely the opposite of a debit Debits appear in the left tally column of a ledger and credits appear in the column directly to the right...
Copyright (c) 2009 Isnare.com. All rights reserved.
Got a question about this article? 
