Final work Assignment Example | Topics and Well Written Essays - 2000 words - 1

Final work - Assignment Example Underwriting of the common stock will provide a clear insurance issued by the underwriter to Khan Unlimited that the common stock offered to the public and shareholders will be subscribed in a full amount. Underwriting is also a perfect option since it ensures that Khan Unlimited in case the common stock offered by the company are not subscribed by public to the degree, the share balance will be taken by the company. Additionally, the alternative is perfect since, the underwriter will have a lower net worth and the total obligation of the writer will not exceed 20 times the net worth of the underwriter. Consequently, the company chose the option since the alternative will undertake in guaranteeing the whole or section of the issued common stock as the public will not take the common stock. Therefore, the company will be relieved from the pressure of security marketing and market uncertainty. The underwriting option will help Khan Unlimited to fulfill the statutory guidelines of reduc ed subscription. The underwriting alternative guarantees the capital adequacy and helps the organization to raise capital. Subsequently, most investors believe in issuing securities when guaranteed by established underwriters. The underwriting will assure that there is quick sale of common stocks in the market. The underwriter will stimulate the industrial development and subsequently create opportunities in the nation. This option relieves the organization the uncertainty and risk of marketing the common stock. The underwriters have a specialized knowledge in the market. The underwriters offer valuable advice to Khan Unlimited when preparing the prospectus, floatation time, and security prices. The experts also offer publicity services to the organization which they are in agreement with. This option also assists in financing the new enterprise and expanding the existing projects. Khan Unlimited used this alternative in building the confidence of investors when