Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Compare and contrast the various options available to a business that is seeking to raise further debt capital.
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Step 1
Capital is the representation of the funds and money that is acquired by a corporation for fulfilling its financial operations and functions. Capital is acquired by the corporation through various internal and external financial sources, such as equity, debt, etc.
Equity capital is the capital of a corporation that is acquired by a corporation through issuing equity stocks in the financial markets. Debt capital is the capital of the corporation that is acquired by the corporation through issuing debt instruments in the financial markets.
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- In financing their operations, corporations have the options of raising capital by issuing stock or debt or both. What are the benefits of using the two sources and what are the risks with each of them?arrow_forwardState two reasons why a company might prefer to issue debt capital rather than equity capital.arrow_forwardThe for an organization is the cost of financing its activities through debt or equity.arrow_forward
- A company may choose to finance its operations or certain projectts by the means of either debt or equity. explain the diffetence between these two methods and give at least two examples of each.arrow_forwardYou have learnt three approaches that can be used in determining the discount rate in equity valuation: factor models, characteristic models and the implied cost of capital. 1. Describe the detail procedures in implementing the Capital Asset PricingModel (CAPM) in practice.arrow_forwardAs a micro-enterprise, which sets of financing are the most likely to be used? *A. Banks and venture capitalistsB. Tax holidays and leasesC. Retained earnings and convertible securitiesD. Public issuance of equity and debtarrow_forward
- What is meant by Capital Structure of a company? In this context, describe the varioussources of funding available to companies.arrow_forwardUnderstanding the impact of debt in the capital structure Suppose you are conducting a workshop on capital structure decisions and you want to highlight certain key issues related to capital structure. Your assistant has made a list of points for your session, but he thinks he might have made some mistakes. Review the Ilist and identify which items are correct. Check all that apply. Workshop Talking Points An increase in debt financing beyond a certain point is likely to increase the firm's cost of equity. An increase in debt financing decreases the risk of bankruptcy. An increase in the risk of bankruptcy is likely to reduce a firm's free cash flows in the future. Risks of bankruptcy increase management spending on perquisites and increase agency costs. The pretax cost of debt increases as a firm's risk of bankruptcy increases.arrow_forward
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