Utility companies rely heavily upon common stock as a means of financing their growth mainly to maintain their debt-to-equity ratio.

Question

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Utility companies usually have a high amount of fixed assets and require a significant amount of financing. They need to maintain a certain debt-to-equity ratio to satisfy investors and creditors that the company is managing its debt effectively. While debt is an important component of financing, issuing common stock is also necessary to maintain this ratio and to provide additional funds for growth and expansion. Therefore, utility companies rely heavily upon common stock as a means of financing their growth.

Utility Companies Rely Heavily Upon Common Stock as a Means