Highlight four advantages and disadvantages to a company of being listed on a stock exchange.

CPA-Financial-Management-Section-3 Revision kit

Advantages of being listed
• New funds may be easily obtained from the stock exchange
• Easy pricing of shares
• A better credit standing obtained
• Easy share per transfer (ownership)
• Buying other companies is easier
• Wide ownership of the firm
• Reduction in perceived risk by shareholders
• Greater prominence and status given to quoted companies may create goodwill for the company.

• Cost of floating
• Stringent stock exchange regulation
• Agency problem due to divorce of management and ownership
• Dilution of control from wider holding of shares
• Increased chances of forced take over.
• Extra administrative burdens on management
• Disclosure requirements

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