blank Chapter 10 Notes Part 2

Blank Chapter 10 - Advantages 1 Business is not obligated to(even in cases of bankruptcy 2 Involvement of can assist in managing the firm& may

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Debt versus Equity Financing Management 305 I. Debt Financing - money that your business _________ and is obliged to __________. Advantages: 1. Debt does not dilute _____________ in the company 2. Lender has no control over _________________ 3. _____________ and ________________________ are known amounts which can be forecasted and planned for. 4. Interest paid on the loan is generally _______________ 5. Less complicated than ____________ which requires compliance with state and federal securities laws Disadvantages : 1. Must at some point be __________ (which requires additional cash flow) 2. 3. Too much debt restricts __________ (b/c of the high cost of servicing the debt &/or restrictions placed by lenders) 4. Risky loans result in ___________________ 5. Too much debt restricts ___________________ II. Equity Financing – money received in exchange for ___________________
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Unformatted text preview: Advantages : 1. Business is not obligated to _______________ (even in cases of bankruptcy) 2. Involvement of _________________ can assist in managing the firm & may increase credibility of a new venture —___________ added 3. More cash available to the new venture because ___________________________ 4. _________________ do not have to be pledged as collateral Disadvantages : 1. Dilution of _________________ 2. Less (or loss of) control due to _________________ 3. Loss of future profits—______________ paid to equity investors 4. ____________________ may not be tax deductible (e.g. C-Corporations) Sources: http://biztaxlaw.about.com/od/financingyourbusiness/a/debtvsequity.htm http://smallbusiness.findlaw.com/banking_financing/source/business_events/be1_5debtvsequity http://www.bookrags.com/research/debt-vs-equity-financing-eom/...
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This note was uploaded on 10/17/2011 for the course MNGT 305 taught by Professor Chadwick during the Summer '11 term at Nicholls State.

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