Small firms are reluctant to obtain capital through the sale of common stock because of:

Question

Quizplus · Accepted Answer

Small firms are often closely held by a few owners or founders, and they may be hesitant to sell common stock to outside investors because it could result in a loss of voting control. Additionally, issuing stock can be expensive due to legal and administrative costs, which can be a significant burden for small businesses. Therefore, both the potential loss of voting control and the high issuance costs make small firms reluctant to obtain capital through the sale of common stock.

Small Firms Are Reluctant to Obtain Capital Through the Sale