The Disadvantages Of Corporate Debt: Dis And Disadvantages?

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Assignment 7
Corporate debt is a large topic. Within this topic there are many different advantages and disadvantages of corporate debt. One advantage of corporate debt is that it is a cheaper source of fund than equity up to a certain limit. Another advantage is it does not dilute the ownership of the company. Another advantage is that interest is tax deductible. It is an advantage that it increases the payout to equity stock holders when the company performs well. One last advantage is that it can be obtained for short term and long terms based on requirement. One disadvantage of corporate debt is that the payments of interest and principal must be made in time and the firm needs to have enough cash flow in time to manage that. Another disadvantage …show more content…

A number of reasons provide sanction for a corporate merger and acquisition, not all of which are necessarily financial in nature. Moreover, M&A is within the scope of the Board of Directors to pursue (1) and the company executives to initiate and execute. Since board members may also be subject to political, social, and personal interests, decisions seemingly in favor of the shareholders may also become quagmire with additional factors. According to Investopedia.com, an estimated 66% of mergers and acquisitions are not successful because of M&A intent. Of the 33% that are considered successful, the mergers and acquisitions achieved a net gain from the M&A with our without bad M&A intent. A number of reasons for the majority of failures exist in addition to the failures themselves indicating a potential disadvantage of M&A activity is a relatively high risk of failure.(www.investopedia.com). In some cases, mergers and acquisitions may not only disadvantage the shareholders but consumers as well. In both cases, this may happen when the newly formed company becomes a large oligopoly or monopoly. Moreover, when higher pricing power emerges from reduced competition, consumers may be financially disadvantaged. There are some potential disadvantages facing consumers though. One of which is increase in cost to consumers. Another is the decrease of corporate performance and services. Suppression of competing businesses is another disadvantage. Shareholders may also be disadvantaged by corporate leadership if it becomes too content or complacent with its market positioning. In other words, when M&A activity reduces industry competition and produces a powerful and influential corporate entity, that company may suffer from non-competitive stimulus and lowered share prices. Lower share prices and equity valuations may also arise from the merger itself being a short-term disadvantage to the

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