Your cousin owns 100% of the common shares of a corporation, Ghost River Back Country Limited, a retail company specializing in outdoor clothing and equipment. The company has the opportunity to purchase land and a building in a desirable location that would be used to operate a second store. Your cousin is very excited about this opportunity but is wondering about the best way to finance this purchase as the company currently does not have excess cash. She and the seller are currently considering the possibility of issuing new shares of Ghost River Back Country Limited to the seller to pay for the land and buildings.
Instructions
Write a memo to your cousin explaining some of the advantages and disadvantages to issuing either common or preferred shares, compared with borrowing money, to purchase the land and buildings. Also include in your discussion any issues in terms of recording the transaction if shares are issued.