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syed
TOPIC QUESTION - PAPER 1
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syed
October 9, 2025 at 1:47:52 PM
May/June 2022
Version 3
5.0 Financial Information and Decisions
5.1 Business Finance: Needs and Sources
YOUR ANSWER
issuing new shares to finance expansion means there will be a permanent source of capital so reduced cash outflows for a limited company.
however, issuing new shares means there will be profit sharing as shareholders may expect dividends and tax.
bank loans will allow the business to borrow full amount of money which can help finance expansion for a limited company
but, interest charges will have to be paid which can increase costs of the business.
i believe issuing new shares is the best way for a limited company to finance expansion because the business does not have to repay amount so there will be less debt.
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