1) It can be costly and time consuming to issue new common equity. The costs included with issuing new common equity are termed flotation costs. Issuing new equity means that the present shareholders share the organization with others. If the organization is successful, the owners might not be so willing to share the organization's ownership. This implies that the choice of debt or equity can encompass signaling features.

2) How reliable are ratios when employed to assess fast-growing companies? How is it used to assess fast-evolving economic sectors like Internet companies? How are ratios helpful in assessing turnarounds? What is the best measure of performance for companies in the cyclical sectors?