logo image

Debt-Equity Mix Essay

The intention of a company to expand clearly requires much capital and logistics resources. The process needs to undergo a definite evaluation measure to maximize the financial capability of the corporation. A debt-equity mix is a process of maintaining a money resource without compromising the ability of the investor to proceed with the investment plan. Apparently, when investments are made, it usually requires to input money equities as well as to acquire a debt principle from the assigned banks of the company (Dynamic Equity, 2000).

In a larger perspective, it would be ideal if the debt-equity combination can be balanced off. In order to achieve this balance at a maximized rate, it should consider the financial capability of the company. The main principle is to take as much debt as possible if the tax cost of such debt is lower compared to the net profit of the available assets, also known as leverage. On the other hand, if the margin of profit is somehow higher than the current interest rates for the assets, minimizing equity and maximizing debt would be ideal if the returns on equity is to be optimized.

If these conditions are not met, then the exact opposite of the

Need essay sample on "Debt-Equity Mix"? We will write a custom essay sample specifically for you for only $ 13.90/page

process should be executed. On a general note, if there are no sufficient funds to pay for debts, then the most appropriate step is to minimize it and use equity to finance it. On the aspect of a dividend policy, the process should always bear the actual asset of the company in which it can rely on for expansion. The payout ratio should always be at a minimal rate if debt is to be incurred at a high value rate.

(Pietersz, 2006). Since a company expansion requires substantial amount of financing, dividends to be distributed can only be disseminated based on the lowest possible value projection from the profit margin of the current available assets. References Dynamic Equity. 2000. Debt vs. Equity. Retrieved November 10 2007 from http://www. dynamic-equity. com/vcmag03. htm. Pietersz, G. 2006. Dividend Policy. Moneyterms. Retrieved November 10 2007 from http://moneyterms. co. uk/dividend-policy/.

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
×
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
|
Complete Buyer Protection
|
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy