chap11-FinancingBusiness

chap11-FinancingBusiness - Financing The Business Sources...

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Financing The Business Sources of finance Equity capital compared with debt capital Gearing Cost of financing and WACC
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Two main sources of external finance are available to a company equity (ordinary shares) debt (loans) Sources Of Finance (1) Sources Of Finance (1)
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Sources of internal finance to a company are its retained earnings extended credit from suppliers benefits gained from more effective management of its working capital Sources Of Finance (2) Sources Of Finance (2)
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Equity Capital Compared With Debt Capital Equity Capital Compared With Debt Capital
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gearing, or the debt/equity ratio, is the relationship between the two sources of finance, loans and ordinary shares a company having more debt capital than share capital is highly geared, and a company having more share capital than debt capital is low geared Gearing (1) Gearing (1)
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The following are two of the most commonly-used gearing ratios gearing = long-term debt equity + long-term debt debt equity ratio = long-term debt or leverage (D/E) equity Gearing (2) Gearing (2)
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chap11-FinancingBusiness - Financing The Business Sources...

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