What is a drawback of using only equity to raise capital?
A) The cost
B) Fluctuations in the stock market
C) Dilution of the control of the company
D) That it will cause EPS to roller coaster
E) That it doesn't raise as much capital as debt financing

Question

Quizplus · Accepted Answer

Using only equity to raise capital can lead to dilution of the control of the company as more shares are issued to investors. This means that the original owners or shareholders will have a smaller proportion of the company and may lose decision-making power.

What Is a Drawback of Using Only Equity to Raise