An existing corporation that wants to secure funds to expand its operations has three options. It can issue new shares of stock, using the process described earlier.
That option will reduce the share of the business that current stockholders own, so a majority of the current stockholders have to approve the issue of new shares of stock.
New issues are often approved because if the expansion proves to be profitable, the current stockholders are likely to benefit from higher stock prices and increased dividends.
Dividends are corporate profits that some companies periodically pay out to shareholders.
Thursday, March 5, 2009
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