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Capital structure refers to a companys: (Points : 1) investment of capital. management of working capitalcurrent assets and liabilities. mix of debt and equity used to fund the firms assets. mix of marketable securities.
Weegy: July 02 2012| Filed Under » Balance Sheet, Financial Statements, Preferred Shares For stock investors that favor companies with good fundamentals, a "strong" balance sheet is an important consideration for investing in a company's stock. [ The strength of a company's balance sheet can be evaluated by three broad categories of investment-quality measurements: working capital adequacy, asset performance and capital structure. In this article, we'll look at evaluating balance sheet strength based on the composition of a company's capital structure. A company's capitalization (not to be confused with market capitalization) describes the composition of a company's permanent or long-term capital, which consists of a combination of debt and equity. A healthy proportion of equity capital, as opposed to debt capital, in a company's capital structure is an indication of financial fitness. ] (More)
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Asked 7/14/2013 9:56:10 AM
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Debt financing is called leverage because, like a lever in mechanics, it: (Points : 1) makes the company stronger. magnifies the influence a company has. has a magnifying effect on financial performance. can lift a company out of mediocre performance.
Weegy: "Debt financing is called leverage because, like a lever in mechanics, it: (Points : 1) makes the company stronger. magnifies the influence a company has. has a magnifying effect on financial performance. [ can lift a company out of mediocre performance. " answer: Finance manager uses this tool for making effective financial structure of company . Financial structure is just mix of debt and equity and with help of leverage , finance manager gets fund with effective ratio of debt and equity . In simple word leverage is power and relationship between two interrelated variables . These variables may be output , sale , cost and profit . Finance manager calculates these leverage by apply formula and then uses them for taking decision in favour of company's shareholder . Main aim of leverage testing is maximize the earning of shareholder and reduce the risk of company. source: ] (More)
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Asked 7/14/2013 10:00:16 AM
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A benefit of debt financing is that: (Points : 1) not making scheduled debt payments can lead to bankruptcy. interest paid on debt is tax-deductible. loans must be repaid. debt magnifies bad outcomes (i.e., makes earnings more variable).
Weegy: "A benefit of debt financing is that: (Points : 1) not making scheduled debt payments can lead to bankruptcy. interest paid on debt is tax-deductible. loans must be repaid. [ debt magnifies bad outcomes (i.e., makes earnings more variable)." answer: Debt is borrowing money from an outside source with the promise to return the principal, in addition to an agreed-upon level of interest. Although the term tends to have a negative connotation, startup companies often turn to debt to finance their operations. In fact, even the healthiest of corporate balance sheets will include some level of debt. In finance, debt is also referred to as “leverage.” The most popular source for debt financing is the bank, but debt can also be issued by a private company or even a friend or family member. Advantages to Debt Financing Maintain ownership: When you borrow from the bank or another lender, you are obligated to make the agreed-upon payments on time. But that is the end of your obligation to the lender. You can choose to run your business however you choose without outside interference. Tax deductions: This is a huge attraction for debt financing. In most cases, the principal and interest payments on a business loan are classified as business expenses, and thus can be deducted from your business income taxes. It helps to think of the government as a “partner” in your business, with a 30 percent ownership stake (or whatever your business tax rate is). If you can cut the government out of the equation, then it’s beneficial to your business. Lower interest rate: Furthermore, you should analyze the impact of tax deductions on the bank interest rate. If the bank is charging you 10 percent for your loan, and the government taxes you at 30 percent, then there is an advantage to taking a loan you can deduct. Take 10 percent and multiply it by (1-tax rate), in this case it’s: 10 percent times (1-30 percent), which equals 7 percent. After your tax deductions, you’ll be paying ... (More)
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Asked 7/14/2013 10:04:45 AM
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The most obvious leakage or capital market imperfection affecting the debt and equity choice is: (Points : 1) bankruptcy risk. differential taxation of cash flows between debt and equity. the obligatory payment of interest and discretionary payment of dividends. the inability of bond rating agencies to perfectly foresee risk.
Weegy: The most obvious leakage or capital market imperfection affecting the debt and equity choice is: differential taxation of cash flows between debt and [ equity. ] (More)
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Asked 7/14/2013 10:17:34 AM
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