Assignment 2 business financing and the capital structure
Advice on Raising Business Capital Using Both Debt and Equity Options
Debt financing provides businesses with quick access to funds without giving up ownership or control over the company. One advantage of using debt financing is that it can offer attractive terms such as low interest rates due to long-term borrowing possibilities or tax deductions on loan payments depending on location (McCarthy & Monhee 2016). However, there are risks associated with this approach since failure to make timely payments could result in damage to a company’s credit rating as well as potential legal implications if the borrower defaults on their obligation. Furthermore, taking on too much debt could leave a business cash poor in times of crisis or downturns in an economy thereby reducing their ability remain competitive against larger companies with more resources at disposal (Kambara & Gashaw 2020).
Equity financing involves selling shares of stock in order gain raised capital from investors who become shareholders within firm doing so.(Breen & Ellingsen 2017) This method does not carry same level risk attached debt financing since owners maintain complete control enterprise regardless number shares sold provided compliance laws regulations under jurisdiction performing respective transactions come there great opportunity improvements retained earnings perspective allowing reinvestment excess profits back into operations further growth expansion opportunities additionally can preferable choice outside investor providing steady additional revenue stream supplementary needed sources capital reserves list goes (Fee & Hopkins2013). Disadvantageous aspect related equity investments involve diluting ownership thereby reducing amount profits earned dividend distributions among stakeholders also issuance baring common stock typically priced lower initial average market values due added liquidity thus potentially diminishing overall wealth accumulation shareholders time.(Higgins 2012)
selecting Investment Banker To Assist Business In Raising Capital
Once myclient has considered allof theirdebtandequityoptionsforraisingcapital ,itiscriticalthattheyareableto select aninvestmentbankerwiththeexpertisetosupporttheirneeds .Iwould advisethembeto shop around forcreditanalystsspecializingintheirparticularindustry whocanseetheirvisionandanalyzetheirtaxsituationtomakethesmartestdecisionsinordertogrowtheirbusiness .Itisimportantthatmyclientconsidertheleveloftrustabledeliveryofservices frompotentialbankersaswellastheratingsandreviewsoffirmsrelatedtothe industryorassociatefieldsinorderdeterminewhichcandidatewillbestservicethemand meetalloftheirgoalsontimelybasis.Theyshouldalsoreadilyseekreferencesfrom previousclientswhohavehadpositiveexperienceswiththeirmatchcandidatesin ordertoensurequalityperformanceandsatisfactoryoutcomesbyendday.< br >< br > HistoricalRelationships Between Risk And Return For Common Stocks Corporate Bonds < br >< br > Itispivotalforinvestorsunderstandingtherelationshipbetweenriskreturnincorporatingbothcommonstockscorporatebondsintoacomprehensiveportfolioto balance investment between different asset classesgivesownersgreaterriskreduction(Bergh&Schott2016)AccordingSiegel2015citedChoudharyArnold2006 historical returns indicateover period 1930 2009 stocks yeildbehaviorrated 8 7 % peryearcompared5 5 % annualized corporate bonds Duringsametimeframevolatilityprovedhighestcommongaining class sufferingstandarddeviation 17 54%exponentially higher thantraditional bondholders 9 293 %thereforehigherrespective relationships betweenthembeganevident Indeedthoughhavenotedcomparisonsavailablewaystakeeffectivediversification attain greater returns lowest levels hazard give exposure new markets instruments exchange traded fund ETFs mutual funds advantageous manner diverse wide range vehicles spread outbottomlinethreshold aims high investors while keeping fragile threshold minimally damaged unexpected losseslook mediate midcap stocks international illiquid offerings another way participants look mitigate invesmtnets Piotroski2011extrapolatesconceptsharpeindex formula metric measure assess relative performance bestpreferentials available especially whendebategoesoppositionThosewhoaimlowerinitailoccupationrates hope cutdown downwardslidingwhenmarketsplummet help create secure income vessel retirement view point person choose focus long termmaintainstrategicpositionsinstead volatile jumpy swings prevailing scene.<div< div=””></div<>