Question

what is an advantage of financing with common stock? a) it has an inefficient secondary market....

what is an advantage of financing with common stock?

a) it has an inefficient secondary market.

b) it is a senior if a liquidation

c) it does not mature

d) it obligates the company to pay a dividend.

e) it maintains its value

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Answer #1

Answer c) It does not mature

Common stock holders are the owners of the company and they don't have any definite period within which they have to be repaid.They will be repaid only at the of liquidation.

Common stock has an efficient secondary market where investors can trade securities thus it provides high liquidity to investors.

It is to be repaid at the end in the event of liquidation after payment of all the liabilities of the firm thus it is not a senior in the event of liquidation.

There is no obligation in the part of the company to pay dividend either it can be paid or not.Company can retained their earnings.

Since the common stock are traded in secondary market it value gets changed very frequently so it doesn't retains its original value.

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