Students were enquired to answer a question at institution and to mention what is most important for them to succeed. One that response stood out from the rest was practice. Successful persons are usually not born successful; they become successful through hard work and persistence. If you want to complete your goals, keep this in mind! shown below are one of the answer and question example that you can certainly implement to practice and further enhance your information and also give you insights that would guide you to preserve your study in school.
Which financing option has the highest overall costs?
Equity financing has the highest overall cost.
The financing options that are available to the company are equity and debt. Equity Financing refers to the issue of equity shares to the public. Debt refers to the loan taken by the company from the public or any financial institutions. The equity shareholders have the right to vote in general meetings while the debt holder does not have any such rights.
The equity shareholders are also entitled to receive dividends while debt holders are entitled to receive the interest regardless of whether the company is having a profit or not. The interest paid to debt-holders is deducted from the net profit before any tax is charged. The interest reduces the taxable income while the dividend is calculated on net profit after tax. Thus, the cost of using debt finance is lower as the amount which is paid as the interest is charged against the tax.
Therefore, Equity financing involves a higher cost than Debt financing.
1. Learn more about raising the equity
2. Learn more about the problem related to equity theory
3. Learn more about the short-term financial goals
Grade: Senior School
Subject: Financial Management
Chapter: Cost of Capital
Keywords: Equity financing, the highest overall cost, debt financing, financing options, capital, business, shareholder’s fund, loan, financial management, raise, issue.
They could definitely hopefully help the student answer the question by obtaining the questions and answer examples. You possibly will then have a discussion with your classmate and continue the school learning by studying the topic to one another.