How are start-up firms usually financed?
Randy’s, a family-owned restaurant chain operating in Alabama, has grown to the point at which expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $15 million in new capital. Because Randy’s currently has a debt ratio of 50%, and also because the family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $15 million. However, the family wants to retain voting control. You have been asked to brief the family members on the issues involved by answering the following questions: