Question 38
Business OrganisationsWhen interest rates are high and still rising the least-cost method used by public limited companies to obtain additional funds for their operations is by
- A.obtaining long-term loans from merchant banks
- B.obtaining short-term loans from commercial banks
- C.selling floating-rate debenture stocks to the general public
- D.selling new ordinary shares to the general public
Show the answer and explanation
Answer: D (selling new ordinary shares to the general public)
Explanation
Shares carry no fixed interest, so selling them avoids the high and rising cost of borrowing.