Debt Verses Equity Financing Essay

Finding the perfect capital structure in terms of risk and reward can ensure a company meets shareholder expectations and protects a firm in times of recession. Capital structure refers to how a business puts its money to “work”. The two forms of capital structure are equity capital and debt capital. Both have their benefits and limitations. Striking that perfect balance between the two can mean the difference between thriving versus trying to survive.

c) Optimization of the capital structure is also consistent with the growth of the company. The optimal capital structure

Finance. In order to finance our startup year, we issued stocks and borrowed loan to finance our operation and for safety in case the sales did not go well. Financing using stocks means that we are selling common or preferred stocks to individuals. In return for the money, they get some ownership over the company and its interest. This helps to bring public’s awareness about the company. If the sales suffice, we will pay the debt in the second round.

Equity Capital: represents the risk capital staked by investors through the purchase of a company’s stock.

Life insurance is meant to provide funds to replace a breadwinner's to protect and support dependents. Chad and Haley are dependents, not income providers. Therefore, the purchase of life insurance is unnecessary and not recommended. The Dumonts should use the money they would spend on policies for the children to increase their own coverage.

Nevertheless, the use of the Optimal Capital Structure (OCS) is the right techniques to be used in order to acquire the right combination of debt and equity that can maximize the

There are several factors that guide the choice among debt financing and equity financing such as potential profitability, financial risk and voting control. Equity financing is a method used to obtain capital in order to finance operations, growth or expansion. Sources of equity financing are extremely important. Major sources of equity financial are Retained Earnings, sale of stock, and funds provided by venture capital firms. Profits that are kept and reinvested are called Retained earnings, which is a very attractive source fund due to the savings it provides to the entity by not paying the interests, dividends or underwriting fees related to issuing securities. This source of financing does not dilute ownership, but it

In today’s world, customers often face a dilemma about whether to buy or lease. Lease is an agreement in which one party gains a long term rental agreement, and the other party receives a form of secured long term debt. On the other hand, buying involves transfer of ownership from seller to buyer. Buying or leasing decision depends mostly on customer’s preference. There are many factors to consider before taking a buying or leasing decision.

cash from sales) and external sources of finance from outside the business (e.g. a bank loan)." There is a need of external financing for the expansion through acquisition. External financing is a good source of raising money besides internal funds. As per business finance, "external financing can take the shape of two different types of financing, debt or equity. Debt financing includes bank loans where a company gets financed by issuing debentures which they have to pay back after a certain period of time. It is called debt financing because the company is in debt to the bond holders and if they were to go bankrupt, the bond holders would have claim to any remaining assets. In this case these are secured business loans. Equity financing is when a company decides to give up ownership in the company to raise funds. This is usually done by selling company stock to investors. Sometimes this could include seeking out angel investors or venture capitalists. If you are expecting to get external financing through equity financing make sure that your business has a product or service that is unique, and that there is a high demand for your product or service. Most venture capital investors or even angel investors will not look at an offer unless they see a large growth potential." (2)

* The value of the stock may see an upward trend thus increasing the initial investor’s financial wealth

The question of whether to rent or buy is not a new one in the construction industry. It also happens to be one of the most important decisions that you will have to make. A lot of what goes into the rent vs. buy decision has to do with your company's size as well as the economy in which you are operating; however, renting will win out most of the time. Consider the following look at the issues with buying construction equipment.

Furthermore, the clientele effect can impact the stock price because it assumes that the investors are attracted to the company for its policies and when these change the investors will react and adjust their stock accordingly (Moles & Terry, 2005). In addition to this, the issuance of debt and repurchase of stock could signal to investors that managers believe the stock in undervalued.

It is important to create a context when looking at funding structure as each industry has different debt to equity ratio benchmarks, as some industries tend to use more debt financing than others. A debt ratio of .5 means that there are half as many liabilities than there is equity. In other words, the assets of the company are funded 2-to-1 by investors to creditors. This means that investors own 66.6 cents of every dollar of company assets while creditors only own 33.3 cents on the dollar.A debt to equity ratio of 1 would mean that investors and creditors have an equal stake in the business assets. A lower debt to equity ratio usually implies a more financially stable business. Companies with a higher debt to equity ratio are considered

In past time getting money in a flash is just like dream come true. But now all dreams can come true with Instant Cash Loans. These loans offer you a helping hand which would solve your financial issue in an instant. These loans can be availed in a short duration; therefore, it is an ideal solution for your interim fiscal shortcomings needs. With this swift fund you can basically meet your every month expenditures like attending unexpected home repair or a automobile repair, paying the pending grocery bills and other household expenses. Borrowers with poor credit status get the approval for instant cash even having bad credit history. The bad credit history of defaults, late payments, payment over dues, CCJs, IVA & so on is not more an issue. As it is a short term loan it carries a higher rate of interest as compared to other traditional loans. The rate of interest is higher due to the absence of placing any collateral as security against loan amount. So the risk is higher on the lender side so they charge higher rate of interest. Borrowers can grab these loans by applying online as it is a quickest and convenient mode of application. With online mode you don 't have to wait a long time, deal with faxing papers back and fill any long form. You simply just need to fill an online application form with your genuine personal information. And after submitting the form the lender verifies the details and within short span of time the amount is credited into your bank account.

There are two basic ways of financing for a business: Debt financing and equity financing. Debt financing is defined as 'borrowing money that is to be repaid over a period of time, usually with interest" (Financing Basics, 1). The lender does not gain any ownership in the business that is borrowing. Equity financing is described as "an exchange of money for a share of business ownership" (Financing Basics, 1). This form of financing allows the business to obtain funds without having to repay a specific amount of money at any particular time. There are also a few different instruments that could be defined as either debt or equity. One such instrument is stock options that an employee can exercise after so many years with the