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Capital Structure

Capital Structure

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Published by tabi_thegr8

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Categories:Topics, Art & Design
Published by: tabi_thegr8 on Mar 25, 2010
Copyright:Attribution Non-commercial


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Capital Structure
Debt versus Equity
Advantages of Debt
Interest is tax deductible (lowers theeffective cost of debt)Debt-holders are limited to a fixed return –so stockholders do not have to shareprofits if the business does exceptionallywellDebt holders do not have voting rights
Disadvantages of Debt
Higher debt ratios lead to greater risk andhigher required interest rates (tocompensate for the additional risk)

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