I gotta corporate accounting assignment which must be done by wednesday morning 1500 words

Part A
The paper analyzes the options that lie ahead of Johnsons P/L to raise capital for its
business. Johnsons P/L can use two sources of capital i.e. debt of equity to fund the future
projects. There are certainly some advantages related to forgoing debt financing and using equity
financing. Equity financing occurs when a company raises capital by exchanging ownership
interests in the company. These interests take the form of stock or instruments that can be
converted into stocks. Owners of this stock can take an active role in the operations of the
company.
Companies that use equity financing are not responsible for repayment of the funds
collected. So the primary purpose of equity financing for Johnsons P/L would be investment
rather than repayment (Hussain, 2006). The company only awards its shareholders with
dividends and increase in wealth. Also, in case of liquidation of Johnsons P/L, common
shareholders would have the last right on the funds of the company and subordinate debt has a
priority. However, these stocks usually perform better than bonds or preferred stock over a
period of time. So thus will only increase investors for the Johnsons P/L and will further increase
the stock price of the company (Goyal, 2007).
Also, there are certain disadvantages to Johnsons P/L for forgoing the debt that it initially
thought to raise. Debt brings financial leverage to a firm, and is the cheaper source of capital as
compared to equity. So cost of debt would have been cheaper for Johnsons P/L as compared to
the cost of Equity (Myers, 1984). A firm is considered to be highly aggressive it goes for debt
rather than equity, as in such case it seems to be utilizing cheaper source of capital for financing
the growth of the company. Also debt would not have diluted the ownership of promoters in the
company whereas raising equity will dilute the ownership of promoters of Johnsons P/L in the
company. Also equity holders need to be paid dividend at most times (but it is not compulsory)
to keep them happy (Hussain, 2006). Also debt financing would have given tax shield to
Johnsons P/Ls, whereas equity financing won’t offer any tax shield to the company.
Equity financing occurs when a company raises capital by exchanging ownership
interests in the company. These interests take the form of stock or instruments that can be
converted into stocks. Owners of this stock can take an active role in the operations of the
company. Companies that use equity financing are not responsible for repayment of the funds
collected. One type of equity financing is common stock. Common stock represents an
ownership stake in a company (Kalpan, 1998). Holders of common stock are afforded the ability...