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WA6 5111.docx - Dottie’s Grocery’s Capital Choices MERGERS,...

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Dottie’s Grocery’s Capital Choices1MERGERS, BUY-OUTS, INITIAL PUBLIC OFFERING (IPO) PROCESS,FUNCTIONS OF MONEY, AND THE FINANCIAL MANAGERBUS 5111 FINANCIAL MANAGEMENTUNIVERSITY OF THE PEOPLEDR.STACY STREBELNAME REMOVED FOR ANONYMITYMARCH 09TH, 2021
Dottie’s Grocery’s Capital Choices2Dottie’s financing choiceCapital is a necessity for companies to grow and sustain operations and below, we aregoing to explore the better option for Dottie’s Grocery to obtain $ 23 million, between issuingstock or debt to the public and the impacts and implications of each choice.Impact of issuing Common stock.Under stock issuance, companies issuing stock for the first time go through the IPO(Initial Public Offering) to raise capital and this is an alternative to issuing debt (ChronContributor, 2020). Benefits attached to this option include acquiring capital without debtaccumulating in case the company opted for loans, common stocks do not require thecompany to pay interests to shareholders but rather can pay dividends in case of extra cashafter-tax (Chron Contributor, 2020). With issuing of stock to the public, there are chances ofattracting new business investors as well as improving the company's credit rating (ChronContributor, 2020).Costs include diluting company ownership and management structure which affectsthe decision-making process since the new stockholders will have to be consulted before afinal decision is made which will delay important actions. This option is costly to process ascertain procedures must be followed for a company to sell shares and requires approval fromSEC (Securities Exchange Committee) (Chron Contributor, 2020). Public companies aresubjected to periodic audits by SEC, required by law to report quarterly or annually and availtheir financial information to the public and are supposed to be transparent but thisinformation can be used by competitors which poses a huge threat to Dottie’s Grocery (Davis,2019) yet the company has, over the course of 45 years guarded this information against thepublic and competitors.

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Term
Fall
Professor
Dr. Schmidt
Tags
Dottie s Grocery s Capital Choices

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