1. Identify the advantages and disadvantages of each option (5 items x 5 points).

Options Advantages Disadvantages

Generate funds internally from
current business operations
1. It allows an organization to maintain full
control.
2. It improves the planning process.
3. It reduces the overall cost of most
projects.
4. It improves the overall value of the
company.
5. It limits outside influences on the
company.
6. It offers several sources for the cash that
you require.
7. It requires no additional equity to be
issued.
1. It may have a negative impact on your
operating budget.
2. It requires accurate estimates to be
effective.
3. It may have fewer tax benefits for the
organization.
4. It increases the risk of a bankruptcy for
some businesses.
5. It can take more time to complete
projects.
6. It limits the number of outside insights
that are available.

Borrow money from the bank 1.Keep Control of the Company 1.Tough to Qualify 
2.Bank Loan is Temporary 2.High Interest Rates
3.Interest is Tax Deductible 

Issuance of a commercial paper
Issuance of bonds
1.It is quick and cost effective way of raising 1. It is available only to a few selected
working capital. blue chip and profitable companies.
2. Best way to the company to take the 2. By issuing commercial paper, the
advantage of short term interest fluctuations in credit available from the banks may get
the market
reduced.
3. It provides the exit option to the investors to
quit the investment.
3. Issue of commercial paper is very
4. They are cheaper than a bank loan. closely regulated by the RBI guidelines.
5. As commercial papers are required to be
rated, good rating reduces the cost of capital
for the company.
6. It is unsecured and thus does not create any
liens on assets of the company.
7. It has a wide range of maturity
8. It is exempt from federal SEC and State
securities registration requirements
1. May not want to sell assets, possible tax 2.Riskier, Interest Payments, possible tax
benefits disadvantage

Offer additional authorized
capital stock
1.The ability to finance new growth without 1.Relinquishing part of the company's equity.
going into debt. Rather than taking out a pricey By selling capital stock to investors, the
loan (which will show as a liability on the company is giving up some of its ownership.
public financial documents), the company can 2.Dilution of share value. The more capital
sell capital stock to fund its growth. stock the company issues, the more diluted
2.The amount of capital raised by selling stock the value of each share becomes.
may be more than the funding received had the 3.As a company continues to raise capital
company taken out a loan from a bank (plus, through the issuance of stocks, the owners
they're saving on the interest they would have and founders may, at some point, no longer
paid on the bank loan). have majority control.

2. Which do you think is the best option to be taken by the company? Justify your answer. (1 item x 5 points)
 In my own opinion, the best option to be taken by the company is to offer additional authorized capital stock. one
commonly overlooked issue is choosing the number of authorized stock shares to issue in the
beginning. For most businesses, this isn't too concerning, but that's because most businesses aren't
startup companies that grant stock options or pursue venture capital. The way the company is
organized and how capital is raised is important to consider from the beginning, and the authorized
stock issued is where it starts. There isn't a set number of authorized stock a company should
authorize when starting.