Question

1. Go to Yahoo! Finance or another source and pick a stock to track for the last year. Discuss the performance of the stock over the last year and offer your thoughts being specific about why the stock has done well or not.

2. What are some reasons that a company might choose common stock as means of financing their business rather than using debt? Also comment on why a company might choose debt over common stock.

Answer 1

1. I chose tesla and stock has one returned almost 300 percent in past one year. This is because they have beaten the estimates in their earnings and future demand is also high. Once this Covid 19 fear is over, Tesla will shoot to all time highs.

2. Common stock is preferred over debt as it has fewer restrictions in comparison to debt, Higher liquidity , Voting power , A probability of earning higher returns.

Debt are preferred over stocks as they can be used for raising long term money, less fluctuations and provides with interest rate tax shield.