Shareholder Info: Donna formed a corporation several years ago by issuing 500 shares of stock. There are 10 shareholders with the smallest shareholder owning 25 shares and Donna holding the most at 100 shares. The corporation needs additional cash, but the current shareholders do not wish to have any additional shareholders. What are their options and what additional factors should the current shareholders consider in raising the additional cash? What can Donna do to add additional shareholders, if anything?

There are various ways for Donna's corporation to raise additional capital. One is through debt financing while the other one is through equity financing. Debt financing involves bonds,...

Each approach has its own advantages and disadvantages.
Debt financing aims to raise additional cash by borrowing money, usually with interest. The advantage is that business ownership is not affected, and company's only obligation is in repaying the loan. The disadvantage is incurring debts affects a company's financial position and puts its credit rating at risk. Incurring too much debt can also hamper a company's potential to attract future investors and customers.

Equity financing, on the other hand, aims to raise additional capital by trading cash with business ownership.…