Posted on Thursday, 30th April 2009 by admin


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I am having trouble digging up some info for a question on my homework for Managerial Finance. Any suggestions? Here is the prolblem…

You are the CFO of an established, publicly traded firm. Your firm needs to raise an additional $10 million for business expansion. You could finance the expansion through retained earnings or through stock. Discuss the plusses and minuses of each funding source. What source would you recommend to the board of directors and why?

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One Response to “What are the pluses and minuses of business expansion through retained earnings or through stocks?”

  1. Says:
    May 2nd, 2009 at 6:16 pm

    Small Business Web Hosting

    You have the cash to expand – you spend that cash and you no longer have a cash cushion should other events occur.

    You sell stock to raise the money – you have to pay dividends to the stock holders, which is not tax deduct-able to the corporation. More outstanding stock means that ownership % change.

    As CFO it is your job (best guess) as to which is the best move for your company.

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