Impacts of Going Public or Remaining Private of Companies

Impacts of Going Public or Remaining Private
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Impacts of Going Public or Remaining Private
Companies are caught up with the dilemma of either remaining private or going public because remaining private or going public has advantages and disadvantages. According to SEC (2020), going public refers to the company taking up an initial public offering by selling stock or shares to the general public to raise capital and increase its prestige. It also helps the company expand. However, there are disadvantages associated with the practice of going public than remaining private, such as the costs and risks associated are high. On the other side, remaining private is when a company chooses to remain private and has few owners or stakeholders without listed on public. This gives the companies more freedom to choose the investors and retain their strategies. The decision to either remain private or go public is motivated by various factors.
The main aim of going public is to raise capital for the company. Notably, the capital the public invests must never be repaid and does not involve getting interest charges. The investors' main interest is receiving appreciation for investing in the company or receive dividends. Going public also helps a company benefit from future needs, such as public debt offerings or new stock offerings. When a company goes public, it benefits from increased public awareness, leading to securing new customers and new opportunities. For example, suppose a new private company that is not known by many people goes public. In that case, the people in the community will know more information about the company and its products and many people would want to invest or become customers (Advameg, 2021).
When a company remains a privately held entity, it can also meet the same goals like when it goes public. This is because a private company has fewer or no corporate boards or shareholders that the company is answerable to. Therefore, the company leaders and managers can do what they think is right without being answerable to anyone. The main reason for going public is to raise capital, but this capital can still be raised when the company remains private. It can be raised by coming up with new and innovative marketing strategies helping the company market itself easily and earn the required capital. The capital can be gained from private investors. It is usually costly for companies to go public. The financial resources used to list the company in public could be used to secure more opportunities with potential of helping the company improve and meet its goals within a short period.
According to Leeds (2020), financial ratios are defined as the relationships determined by the company's financial information, which may be used for comparison purposes. They help interpret the company's finance raw data to get a clear picture of its performance. Identification of the financial ratios helps an investor make the right decisions before investing in a company. The four leading financial ratios include the liquidity ratio, which shows its ability to pay out its current obligations, which means paying liabilities and debts. When a company is unable to meet its obl...