From a social welfare perspective, ordinary shares are a desirable form of financing in part because it involves no fixed charge payments.Its inclusion in a firm's capital structure makes the firm less vulnerable to the consequences of unanticipated declines in sales and earnings than if only debt were available.

Question

Quizplus · Accepted Answer

Ordinary shares do not involve fixed charge payments, which makes the firm less vulnerable to unanticipated declines in sales and earnings compared to when only debt financing is available. This perspective views ordinary shares as a desirable form of financing for social welfare.

From a Social Welfare Perspective, Ordinary Shares Are a Desirable