Corporate debt is a large topic. Within this topic there are many different advantages and disadvantages of corporate debt. One advantage of corporate debt is that it is a cheaper source of fund than equity up to a certain limit. Another advantage is it does not dilute the ownership of the company. Another advantage is that interest is tax deductible. It is an advantage that it increases the payout to equity stock holders when the company performs well. One last advantage is that it can be obtained for short term and long terms based on requirement. One disadvantage of corporate debt is that the payments of interest and principal must be made in time and the firm needs to have enough cash flow in time to manage that. Another disadvantage is that the cost of debt starts increasing after a certain leverage ratio due to increased risk. Another disadvantage of corporate debt is that the company needs good credit rating to secure a debt. Another disadvantage is that there may be need of collateral to get a loan. Failure to make a payment in time adversely affect the credit rating is another disadvantage of corporate debt. Another disadvantage is that failure cost may be high in the form of penalty and higher interest charges occur. One last disadvantage is that when the performance of the company is not good, the equity shareholders will get no or minimal return and causing the stock price to go down.
Another large topic discussed in chapter 16 is financial alternatives for distressed firms. One alternative is to keep and restructure. Solutions should be developed with the goal of delivering sustainable change and continuous process improvement. These solutions will focus on lowering operating costs, improving cash flow,...
... middle of paper ...
...and how they will affect the running of these new branches. Another risk is technological expansion. When extending reach overseas and across borders, there are a number of issues concerning the expansion of their technology systems that companies will have to face as well. The primary technological concern in expanding into foreign markets is in finding a way to centralize these systems so to best serve all the branches being developed worldwide. The final risk is joint ventures. One of the key strategies used by many organizations when looking to broaden their reach is in the use of joint venture strategies as a means of partnering with pre-existing, foreign companies. Entering into such a partnership offers a great many benefits, such as allowing the organization to gradually enter these new markets at a much lower risk than fully submerging themselves right away.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Corporate Ethics and Accountability Introduction This research paper is aimed towards understanding the corporate ethics and accountability at the Co-operative. The reason which gives this research a place is due to the ideologies and principles set out within the companies policies, the importance of corporate strategy and the goals and objectives give rise to this topic. When looking into a global company with a single reality its shareholders and staff should all share a similar sentiment to its core values and purpose, although whether acting as part of a tertiary sector or emphasizing fair trade the ethical foundation could be easily compromised from a differed opinion.... [tags: Ethics, Business ethics, Applied ethics, Morality]
1625 words (4.6 pages)
- Heated debates over tax cut have always been one of the central economic themes on American political table. Since taxes relate directly to the quality of lives, it is by no means surprising to find people showing significant concern about policies regarding cutting or increasing the amount they have to pay. The idea that lowering tax rate makes room for growth has remained generally popular among majority, taking possible decrease in individuals’ tax burden and increase in productivity into account.... [tags: Tax, Taxation, Public finance, Government debt]
1266 words (3.6 pages)
- As the argument in previous part, the Chinese stock market is not efficient as a developing countries.It has different situation from developed countries, stock market reactions is only a short-term change and may not reflect the economic consequences of corporate fraud.In other word, previous researches only focus on the cost of equity rather than the cost of debt. In the Chinese capital market, there are various restrictions for firms on equity fianancing such as seasoned equity offerings and right offerings.... [tags: Debt, Interest, Loan, Corporate finance]
1320 words (3.8 pages)
- In Cpcc’s online opposing viewpoints essay, “Student Loans”, it is argued that the methods of taking care of student loans have issues. The essay starts by making a point that borrowers get overwhelmed with debt. Consolidation would sound like a help, but really all it does is create more debt because it makes the payment period longer. The longer you wait; the more interest you accumulate. Then, the viewpoints in the article on student loans acknowledges that the government will continue to go even deeper in debt if no one repays their loans and gets saved by recovery acts.... [tags: Debt, Higher education, University, College]
1046 words (3 pages)
- Corporate Finance and Financial Manager Role Over time, every business finds that while it has attempted to make the best decisions for its success, sometimes the right choices were made and sometimes the wrong decisions were made. Having said that business decisions are important and could succeed in the business world if they answer for themselves questions like: how can we define if we are doing well in our business. Or what are the best options and decisions. Are we generating profit or loss.... [tags: Finance, Corporate finance, Investment, Debt]
725 words (2.1 pages)
- Mortgages, car loans, student loans, and having children, are all situations that can drive families to the overwhelming doom of debt. Debt is mostly overlooked for the simple reason that it may be considered normal. Certain types of debt like car and mortgage payments are almost expected. Debt is sometimes very difficult to evade, especially if money is not managed sensibly. Many families accumulate debt due to overspending, medical bills, and unemployment. Credit companies and banks make it very easy for families to spend money they do not have.... [tags: Debt, Money, Payment, Loan]
762 words (2.2 pages)
- Corporate Finance (ICM251): Assessed Essay (a) What are the agency costs of debt and outside equity as described in Jensen and Meckling (1976) and are they important in corporate finance. According to Jensen and Meckling (1976), the specification of individual rights defines how costs and rewards will be allocated in any organisation. The contracts between the owners (the principals) and managers (the agent) of the firm will also define who is responsible for each specific costs and rewards. In the assumption that both parties, the principal and the agent, are utility maximizers’, here is a possibilities that they have divergent interests and conflicts of interest will arise as the princip... [tags: Finance, Corporate finance, Debt, Bankruptcy]
2454 words (7 pages)
- College debt. College debt is a controversial topic. Some people say it is worth the debt others say it is not worth the debt. College is worth the debt. Statistics prove that the higher amount of money you earn annually coincides with the higher education you have received. For example “Lifetime earnings for a college graduate are substantially higher than of someone without a college degree, even when you deduct all the money you would have made if you worked full-time and the costs of student loans.... [tags: Higher education, Academic degree, University]
1026 words (2.9 pages)
- Government spending is a controversial topic. Even though the government has a set budget each year that Congress and the President of the United States collaborate on, the United States continues to fall deeper in debt. According to U.S. National Debt, the U.S debt has been larger than our total annual gross domestic product since 2012. In other words, our debt is larger than the value of all the goods and services produced in the country within a twelve month period. “It is said that the U.S is currently $19.2 trillion dollars in debt (U.S.... [tags: Government debt, United States public debt]
787 words (2.2 pages)
- Plagiarism is an extraordinarily large topic these days. Many teachers are spending hours slamming the thought in students’ heads that plagiarism is evil. Teachers have lengthy lectures and some even make their students write a report on plagiarism. Most teachers have a strong, negative opinion about plagiarism, but a student’s perspective can be entirely different. Plagiarism is defined as “an act or instance of using or closely imitating the language and thoughts of another author without authorization and the representation of the author’s work as one’s own, as by not crediting the original author.” Instructors and teachers seem to know the narrow line between plagiarism and honestly u... [tags: Academic dishonesty, Plagiarism, Education, Wrong]
944 words (2.7 pages)