Please explain one advantage and one disadvantage of financing a company with debt. Advantage Disadvantage
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Please explain one advantage and one disadvantage of financing a company with debt.
Advantage Disadvantage
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- Explain the advantages and disadvantages of the use of debt to a company.Is it better to finance a company thru debt or thru equity? Why? What are the downside and upside to each?True or false?:1. From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.
- Thinking about the definition of the term "flotation costs," should we expect the flotation costs for debt to be significantly lower than those for equity? Why or why not? how can the answer be supported.There are advantages and disadvantages of debt financing in contrast to equity financing. Which of the following is less likely to represent an advantage of debt financing? a. The cost of debt should be lower than the cost of equity for most companies due to the lower risk to the lender and the tax deductibility of interest b. The repayment of debt capital may affect the liquidity of the company c. If the return on assets exceeds the cost of debt, then this will result in a higher return on shareholders’ funds as compared to the return on assets d. The increase in borrowings will not normally affect the voting control of the current shareholders as compared to the issue of shares e. Fixed interest rate loans will result in the variability in the market value of such loans over time which will normally be less than the variability in the value of the equity of the companyThe difference between equity financing and debt financing is that A. equity financing involves borrowing money. B. equity financing involves selling part of the company. C. debt financing involves selling part of the company. D. debt financing means the company has no debt.
- Is this statement true or false? Please explain in detail As debt-financing is usually cheaper than equity financing, debt-financing will lower risk for transnational company.The difference between equity financing and debt financing is that Group of answer choices A. equity financing involves borrowing money. B. debt financing involves selling part of the company. C. debt financing means the company has no debt. D. equity financing involves selling part of the company.What is one of the possible choices for financing a company’s operations and how do we account for the amount we owe and the payments we must make on the debt?