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The concern for managers would be issuing new debt, though the company made over a
million dollars in revenue last year, the net profit was a little less than $150K. Despite this, the
company is missing the opportunity of gaining revenue through upsells and recurring business. If
the business hopes to increase its sales, the model must be implemented.
At this time, issuing common stock is not a viable solution, as the company is still young,
and it would not be wise to dilute earnings this early in the business model. As such it is
suggested that the XYZ Company, fund this initiative for the first three months by using retained
earnings. This recommendation is the safest bet to avoid debt and diluted valuation of the
company that would occur if more common stock were issued.
References
Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed).
Hoboken, NJ: Wiley