Business Financing And The Capital Structure

Ultimately, the company must devise a plan for funding its growth long term. While refinanced bank loans may be adequate to finance the company, it should consider raising funds from selling equity. Proceeds from such a deal might be invested in a business that generates revenue during Be Our Guest's slow seasons and eases the firm's reliance on credit for working capital.

One of the major setbacks to getting capital for a new business venture is the

1. Explain the advantages and disadvantages of debt financing and why an organization would choose to issue stocks rather than bonds to generate funds.

In order to grow her organization, our group advises that Ms. Thorne invest a total of R1 million in new additional facilities to double the operating capacity of the company. In order to grow the company and expand into foreign markets, the company needs to build another facility. It was made clear that the limiting factor in production is not the number of people, rather it is the fact that the old facilities have been outgrown. The way our group advises funding the building would be through debt. Using equity to finance the deal would likely mean giving up part of the company

Raising Capital it one of the most important thing in any business. It's useless having a great idea and the right connections if you don't have the money to get it going. Without capital, your business can't get off the ground. You need it to buy products or materials, pay wages, have a secure cash flow and generally run your business on a day-to-day basis. The most common types of debt capital are bank loans, personal loans, bonds and credit card debt. When looking to grow, a company can raise funds by applying for a new loan or opening a line of credit. This type of funding is referred to as debt capital as it involves borrowing money under a contracted agreement to repay the funds at a later date. With the possible exception of

2. There are two main types of financing, debt and equity. Debt financing typically comes at a lower cost than equity. The reason for this is that debt financing is superordinated to equity debt holders get paid out first. Indeed, payments to debtholders are guaranteed so that the company must pay them before re-investing in the business. The result of this is that some companies prefer not to utilize debt

the financial condition of company will affect their investment directions such as the project with product quality enhancement. So the incentives of investing can be affected by company financial conditions. In addition, the product and input market interactions also can affect company financial condition such as how the firm dealing with product recall and recovering from the recall. Maksimovic and Titman (1991) also argued that debt financing will affect their incentive in investing high quality or enhancement product because the debt financing make company more pressure on cash flow and cutting cost for getting short term profit and in case of bankruptcy. Titman (1984) also mentioned that the relationship between firms and suppliers

The Healthy Potion business (HP) specialises in producing and selling a unique drink called Healthy Potion, which includes cold water with some special concentrate from northwestern China. Recently the business has been developing well and making significant amount of profits. In order to maximise this return and minimise the risk of relying on the profit earned from one product, the business is willing to broaden their product range and have put aside $200 000 for this investment. This case study will give in an in depth strategic analysis for new business development and evaluation of debt and equity financing.

The first goal in managing your own business is financing your business. The financial aspect of running your own business is very significant because it is the component of a company’s operations. As the head of their organization, entrepreneurs should take into consideration by following two simple steps: (1) Acquiring Financing and (2) Account Issues. The first step is acquiring financing. They are many different ways to acquire finances when dealing with the business field. In the article, “Financing Your Business” by “Small Business Resource Center”, it states, “Businesses can find initial financing in a number of ways. Angel investments and venture capital are invested in companies in return for high profits and partial control of the enterprise. Businesses can also take on financing in the form of debt. Debt financing involves a company taking a loan from a lender and guaranteeing it will repay the debt owed to that lender, with interest, by a specified date.” This quote states that the ways to acquire

There are two types of capital that can be raised, debt and equity. Now some would think that as long as there are funds there to work with, regardless of how they were procured, the end result would be the same. However, that is not the case. Debt financing and equity financing have significant differences in how they affect the business’s bottom line and in how they are acquired. For instance, the interest paid on a business loan (option for debt financing) is tax deductible, therefore decreasing the amount of taxable income and increasing overall

1. In which cases the corporation prefers to use debt and in which cases they prefer to use all equity in financial leverage and capital structure? What is better for the corporation Should they use all equity with zero debt? Or all debt? Or both? Which is better for investors to maximize their wealth?

In order to finance future expansion or get past a temporary business slow down (particularly in seasonal business) it is necessary to raise working capital and that involves determining which method of financing is best; debt or equity.

Select the appropriate sources of finance for Company and make recommendations on the best ways of raising finance.

In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm 's capital structure is then the composition or 'structure ' of its liabilities. Simply, capital structure refers to the mix of debt and equity used by a firm in financing its assets. The capital structure decision is one of the most important decisions made by financial management. The capital structure decision is at the center of many other decisions in the area of corporate finance. These include dividend policy, project financing, issue of long term securities, financing of mergers, buyouts and so on. One of the many objectives of

Q3. Does the company have any other sources that it could use to raise the funds it requires? Explain. (In your answer consider the amount required and the purpose of the funds). In which market can these funds be sourced from?