Advantages of raising funds by issue of equity shares are:
(i) It is a permanent source of finance. Since such shares are not redeemable, the company has no liability for cash outflows associated with its redemption.
(ii) Equity capital increases the company’s financial base and thus helps further the borrowing powers of the company.
(iii) The company is not obliged legally to pay dividends. Hence in times of uncertainties or when the company is not performing well, dividend payments can be reduced or even suspended.
(iv) The company can make further issue of share capital by making a right issue.
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