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Advantages And Disadvantages Of Corporations Using Debt To Gain Capital?

Decent Essays
Expanding globally can be very lucrative for a corporation, however it is very risky as well. To, have a smooth transition when expanding globally, a corporation is going to require capital. When looking to raise capital, corporations have several options to choose from. One of the most common options to raise capital that corporations have is debt financing. Debt financing is when a corporation sells bonds, bills, and notes to individuals. (Investopedia) Another form is equity financing, which allows corporations to raise capital by the sale of shares. (Investopedia) In this assignment, I will be discussing the advantages and disadvantages of corporations using debt to gain capital. First, I will discuss the advantages of corporations using debt to gain capital. The first and obvious advantage of debt financing is having the funds that are necessary to purchase new buildings, equipment, and assets that are needed for the expansion of the FedEx corporation. When a corporation decides to use debt financing to gain capital, the lender has no say in the way the corporation is being managed. The management team gets to make all the decisions on the behalf of the corporation. The lender is not involved in any of the planning of the corporation and is no longer needed once the corporation pays the debt in full. Also, the company will be able to have a tax advantage as well. The money that the corporation will be paying for the interest on the loan will become tax deductible for
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