close search
Hit Return to see all results

Discuss some factors that health services managers must consider when choosing between debt and equity financing.  Consider both investor-owned and not-for-profit firms


Discuss some factors that health services managers must consider when choosing between debt and equity financing.  Consider both investor-owned and not-for-profit firms 

Step 1

Before we compare and constrast debt & equity as source of finance, let's understand a bit about equity and debt separately.

Source of External Finance – Equity Finance

  • Gives investors rights to vote, share profits and residual claim on assets
  • Long-term sources of finance
  • Irredeemable in nature
  • A certificate of ownership in the company: investors are entitled to share the net profits and have a residual claim over the assets of the company in the event of liquidation.
  • Investors have voting rights in the company and their liability to the company is limited to the amount of investment.
Step 2

Source of External Finance – Debt Finance

  • A Debenture is a unit of loan amount; an acknowledgment of the loan  received by the company equal to the nominal value of the debenture.
  • A person holding debenture or  debentures  is called a debenture holder and is the  creditor of the company.
  • Bears the date of redemption and rate and mode of payment of interest.
Step 3

Debenture Holders

  • Are entitled to periodical payment of interest at an agreed rate
  • Are also entitled to redemption of their capital as per the agreed terms
  • Have no voting rights
  • Usually (but not necessarily) hold charge / mortgage of the assets of t...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in



Related Finance Q&A

Find answers to questions asked by student like you

Show more Q&A add

Q: A firm has the  following investing alternative:                                  Cash Inflows Year ...

A: Since the question has multiple sub parts, I will address the first five sub parts. Please post the ...


Q: Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops...

A: Please see the table below. Please be guided by signs like [+] / [-] used in each row item to help y...


Q: A bond with a coupon rate of 7.30% has a price that today equals $868.92. The $1,000 face value bond...

A: Calculation of Yield to Maturity of the Bond:


Q: Mexican Motor's market cap is 200 billion pesos. Next year's cash flow is 8.6 billion pesos. Securit...

A: Mexican Motor's market cap, E = 200 billion pesos.Next year's cash flow, C =  8.6 billion pesos.Secu...


Q: Compute internal rate of return (IRR), payback period, and profitability index (PI) for each project...

A: Calculate free cashflows as shown:


Q: How do you calculate yield to maturity?

A: The yield to maturity is nothing but the interest rate of a bond. It can also be termed as the inter...


Q: A retail coffee company is planning to open 90 new coffee outlets that are expected to generate $15....

A: Expected cash flows at the end of year 1, C1 = $ 15.6 mnGrowth rate in the cash flows, g = 3.4% in p...


Q: I asked this question before, and got an answer, but I have a question about the response that was g...

A: The formula that you shared from the textbook is used for time-value-of-money calculations. Such a f...


Q: Hello,  I'm having a hard time with finance in general. I can do basic math with out difficulity but...

A: Finance or financial management involves handling of large quantum of money. Whenever money exchange...

Sorry about that. What wasn’t helpful?