What is the primary difference between debt and equity
Debt represents money owed by the company to another person or entity, whereas Equity represents the capital owned by the company. Debt can only be kept for a limited time and must be repaid after that period has passed. Equity represents the capital owned by the company.
What are the key differences between debt and equity quizlet
The difference between debt financing and equity financing is that debt financing involves borrowing money, whereas equity financing involves raising money from within the company through the investment of retained earnings, the sale of stock to investors, or the sale of a portion of the company to venture capitalists.
What is the difference between equity capital and debt capital quizlet
While debt capital is money obtained from the sale of shares of ownership in the company, equity capital is money provided by the owners or owner of a business.
What is the choice between debt and equity financing
The most important of these is that, unlike debt financing, equity financing carries no repayment obligation and provides additional working capital that can be used to expand a business.
What does the debt to owners equity ratio measure
The D/E ratio, which measures how much a company is financing its operations with debt versus wholly owned funds, is a crucial metric in corporate finance. More specifically, it reflects the capacity of shareholder equity to pay off all outstanding debts in the event of a downturn in the economy.
What are some of the drawbacks to profit maximization as the primary goal of the firm
What are some of the disadvantages of making profit maximization the main objective of the company? It might not take into account the rises in risk that come along with higher profits and it might not take into account the timing of the benefits.
What is meant by a firms debt capacity quizlet
the amount of debt contained in the firms ideal capital structure, or debt capacity.
What are crossover bonds quizlet
A drawback of bond ratings is that they ___. Exclusively focus on default risk. Crossover bonds are bonds that have both an investment grade and a junk bond rating. US Treasury issues are exempt from state income taxes.
What is the nominal rate of return on an investment quizlet
The actual%age change in the dollar value of an investment made without taking inflation into account is known as the nominal rate of return.
How can corporations raise capital
Companies can obtain the funding they require for such projects in four ways: by obtaining early-stage investors, reinvesting profits, borrowing through banks or bonds, selling stock, and reinvesting profits.
What type of investor is most likely to purchase a private placement
Institutional investors, like banks and pension funds, or high-net-worth individuals are typically involved in private placement issues.
Which of the following statements describes a seasoned offering
A seasoned offering is which of the following: an additional equity issue from a publicly traded company.
What does historical data suggest about the nature of short term and long-term interest rates
The nature of short-term and long-term interest rates is suggested by historical data, which occasionally shows that short-term rates are higher than long-term rates.
What are the two major forms of long-term debt
Some of the most popular long-term debt instruments used by businesses include credit lines, bank loans, and bonds with obligations and maturities longer than one year.
What is the meeting place for people corporations and institutions that either need money or have money to lend or invest
In capital markets, savings and investments are channeled between lenders and investors (people or institutions with capital to lend or invest) and borrowers (businesses, governments, and individuals), with banks and investors serving as suppliers.
What does par value represent
Any stock certificate issued for shares purchased shows the par value, which is the price assigned to a single common share by a corporations charter and is frequently lower than the actual value of the shares.
Which of the following would be early sources of capital for a start up company
Which of the following sources of early capital for a start-up company would be founders personal savings, investments by friends and family, reinvested earnings, and bank loans to founders? In a primary offering, shares are sold by a company to a buyer to raise money for a buyer.
What is the difference between debt and equity investment
Equity financing has several advantages over debt financing, the main one being that there is no obligation to repay the money obtained through it. Equity financing involves selling a portion of the companys equity, whereas debt financing entails borrowing money.