Advantages and disadvantages of ordinary shares

Notes

Advantages and disadvantages of ordinary shares as a source of finance

Advantages  Disadvantages 
There is no obligation to repay the funds raised through an ordinary share issue. The cost of equity finance is typically higher than the cost of debt finance because:

(i) The administrative costs of issuing shares are expensive

(ii) To investors, shares are riskier than debt so shareholders expect a higher return

(iii) Dividends paid are not tax deductible whereas interest payments can be used to reduce the company's taxable profits
The amount and timing of the dividend payments is flexible. Issuing new shares will typically dilute the control of the original shareholders.
Notes