What is capital?
Capital:
Just imagine you want to start your own toyshop, now for that you need to invest in property, toy suppliers etc. all this investment you have made to start your business is known as capital. In short capital of business includes all its assets that assists in wealth creation
Why corporations issue stocks
Once you have decided to start your business you will have the budget for the required investment suppose the budgeted value is $25000 and you have $ 10000 with you now to cover the remaining $15000 you will have two options
Either you can borrow it from the others that you will need payback with the interest OR
You can issue the stocks to them who wish to help you in venture in return you are sharing the ownership as well as profit with them.
Advantages of issuing the stocks
Company can raise the capital without borrowing it from the creditors
Company need not to make periodic interest payments to the creditors
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