4 The major sources of finance have their own share of advantages and disadvantages that has beengiven hereunder, the company can makes use of the same for the best of their company-Share CapitalAdvantagesDisadvantagesIt is a major source of raising capitalfor the business.There is fixed rate of interest that isensured on the sameThe company does not have to give itsproperty on loan to get hold of theseshares.The company has to pay a fixed rateof dividend to the shareholdersbefore paying anything, from theprofits of the company, so it is a fixedtype of expenses for the company.There are also chances that overcapitalisation may take place, becausethe share capital can be easilyredeemed so in that case it is a lossfor the given company[ CITATIONMin17 \l 1033 ].Retained EarningsAdvantagesDisadvantagesIt is one of the cheapest sources offinance for the company.It helps in strengthen the overallfinancial position of the company, asit helps in increasing the profit.It also adds on to the overall capitalof the company, which in turn willhelp in improving the overall marketvalue of the company andRetained earnings can be used forvariety of purposes. It is veryimportant that the companies mustbe sure about how they want tospend their money else it might leadto over spending on part of thecompany. Once the company retains some partof the profit, it is also deducting4 | P a g e

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