Assume that you are financial advisor to a business. Describe the advice that you would give to the client for raising business capital using both debt and equity options in today’s economy. Outline the major advantages and disadvantages of each option.
There are pluses and minuses when looking to raise capital utilizing both debt and equity financing options. Debt financing is good to help grow your business by being able to pay for equipment and other assets before you have profit from your business. One of the key strategies of debt financing is it allows you to be able to practice an aggressive strategy in growing the business but depending on the interest rates of the loan this can also be a negative. The money must be repaid over a certain period along with an established monthly payment regardless of profitability of the business. Going this route allows the owner not to relinquish ownership or control of the business. The negative of debt financing is the loan must be repaid plus interest, this is also borrowing against profit not realized and over using debt, and financing can limit future cash flow and repress future growth.
Equity financing means the founder of the business will invest their own money into the company or rely on family and friends to invest in the business in exchange for partial ownership of the business which also includes being able to partake of the profits. One of the major benefits of equity financing is this does not have to be repaid but you share in the liabilities and risk of the company. Since you do not have debt payments, you will likely have a strong cash flow that can be used to grow the company. By keeping a low debt to equity ratio you can apply for a loan when needed.
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...lders. If a person diversifies by selecting bonds that are lower risk and balancing out with more stocks that are aggressive in the portfolio, they will not lose as much money should there be a volatile downturn in the market. By investing in stocks and bonds in the long term it is smart in balancing an aggressive portfolio of investments.
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According to Muller, Prowse, and Soper (2012) the procedures to remove and replace a power supply are;
2. What is the difference between a'smart' and a What is an appropriate capital structure for MCI? 3. What is the difference between a'smart' and a How has MCI raised external funds in the past? How sensible have these decisions been? 4.
The consistent high spending of capital equipment is the first reason why one would recommend reducing the debt to equity ratio. A company with higher levels of debt is less flexible in being able to adjust to new market demands and conditions that require the company to make new products or respond to competition. Looking at the pecking order of financing, issuing new shares to fund capital investing is the last resort and a company that has high levels of debt, must move to the equity side to avoid the risk of bankruptcy. Defaulting on loans occur when increased costs or bad economic conditions lead the firm to have lower net income than the payments on loans. The risk of defaulting on loans and the direct and indirect cost related to defaulting lead firms to prefer lower levels of debt. The financial distress caused by additional leverage can lead to lower cash flows available to all investors, lower than if the firm was financed by equity only. Additionally, the high debt ratio that Du Pont incurred also led to them dropping from a AAA bond rating to a AA bond Rating. Although the likelihood of not being able to acquire loans would be minimal, there are increased interest costs with having a lower bond rating. The lower bond rating signals to investors that the firm is more likely to default than if it had a higher (AAA) bond rating.
Radelet & Borg address the most common arguments for and against the death penalty, and how views on capital punishment have changed over time in respect to six specific areas: deterrence, incapacitation, caprice and bias, cost, innocence, and retribution.
This critical review will look at the skill of administering antipsychotic depot intramuscular injections. This skill was practised while I was on my psychiatric placement in a community setting. The setting will not be named for confidentiality reasons as set out by An Bord Altranais. According to An Bord Altranais (2008), under no circumstances may a student nurse disclose a health care facility’s identity in an assignment. Clinics were run twice a week in this particular community setting for patients with mental health problems such as schizophrenia and bipolar affective disorder to receive their depot intramuscular injections. This skill was chosen as the author was practising administering intramuscular injections almost on a daily basis but there is confusion around what is the best practice for administering depot intramuscular injections in the mental health setting.
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Q1. Using the Mabati Rolling Mills Case Study, explain the various sources of funds as discussed by the management of Mabati Rolling Mills. Give the advantage and disadvantage of each source.
Research on the Sources of Finance for a Business Firms sometimes need to raise finance for Working Capital and Capital Expenditure. Explain what each is and give examples. · Working Capital (or Revenue Expenditure) The working capital is made up of the current assets net of the current liabilities. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital.
The capital structure of a firm is the way in which it decides to finance its operations from various funds, comprising debt, such as bonds and outstanding loans, and equity, including stock and retained earnings. In the long term, firms seek to find the optimal debt-equity ratio. This essay will explore the advantages and disadvantages of different capital structure mixes, and consider whether this has any relevance to firm value in theory and in reality.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.
Sources of finance are the different methods for a business to earn and obtain money. There are lots of ways to obtain money but two large basic sources of finance, which are the “owner’s capital” and “capital borrowed”. They are also called internal sources of finance and external sources of finance. In those sources, they are mainly divided in two groups, which are short-term sources of finance and long-term sources of finance.