Critically contrast between the equity and debt markets. You comparison should make reference to the current...
Critically contrast between the equity and debt markets. You comparison should make reference to the current state of the equity and debt markets (20marks)
Homework Answers
Equity and debt is two different source of finance and their both nature and characteristics differs with each other as equity is owners fund wheras debt is a source of borrowed fund.In case of equity there is no obligation of repayment whereas in case of debt they have to be repaid over certain period of time.In case of equity there is trading in the company stocks or shares of the company whereas in case of debt investors buy bonds, debentures in the market.Equity share holders participate in the profit of the company by way of dividend and capital gains wheras in case of debt they received a fixed interest or coupan amount from the company.In debt market debt instrument holder will receive it's fixed payment irrespective of situation prevailing in the market whereas in case of equity it gets impacted by current situation.
In the current scenario equity market is badly impacted due to covid 19 situation as companies are unable to operate in full efficiency whereas debt market is least impacted as it would not impact them.In this scenario debt market will be preferred by investor or trader as it will provide fixed or definite return.
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Critically contrast between the equity and debt markets. You
comparison should make reference to the current...
What is the chief difference between debt and equity finance? A. Debt finance is cheaper than eq...
What is the chief difference between debt and equity finance? A. Debt finance is cheaper than equity finance. B.Debt finance involves a fixed stream of payments, equity finance involves a piece of profit streams. C.Debt finance is a much better deal for the borrower. D.Debt finance suggests that the lender does much better when the state of the world is one where the borrower does extremely well (as opposed to just somewhat well). In modern day markets, what is the...
So experts state that a 'good debt to equity ratio is somewhere between 1.5 - 1 ...
So experts state that a 'good debt to equity ratio is somewhere between 1.5 - 1 to one. This means for every $1.50 of debt, there should be $1.00 of equity. This is not a golden rule it is a best judgement of experts for an organization to be viable. Examples: Chase bank 1.31 / 1 BOA 1.02 / 1 AMEX 2.66 Remember that debt is the way large organizations are able to invest and grow - the risk though...
The Upper Tier has a current debt-equity ratio of .52 and a target debt-equity ratio of...
The Upper Tier has a current debt-equity ratio of .52 and a target debt-equity ratio of .45. The cost of floating equity is 9.5 percent and the flotation cost of debt is 6.6 percent. What should the firm use as their weighted average flotation cost? a. 7.76% b. 8.33% c. 8.01% d. 8.52% e. 8.60%
What is the difference between debt and equity loans/investments? What should a business owner consider when...
What is the difference between debt and equity loans/investments? What should a business owner consider when considering business capital in the form of debt or equity? Why are ethics important in finance?
Please answer the following question(s): The current conceptual distinction between liabilities and equity defines liabilities independently...
Please answer the following question(s): The current conceptual distinction between liabilities and equity defines liabilities independently of assets and equity, with equity defined as a residual amount. The present proliferation of financial instruments that combine features of both debt and equity and the difficulty of drawing a distinction have led many to conclude that the present two-category distinction between liabilities and equity should be eliminated. Two opposing viewpoints are: View #1: The distinction should be maintained. View #2: The distinction...
34. How many of these ratios measure the relationship between debt and equity The debt ratio...
34. How many of these ratios measure the relationship between debt and equity The debt ratio The equity (proprietorship) ratio The leverage ratio (total assets/total equity) The current ratio a. 1 b. 2 с. 3 d.
Suppose Levered Bank is funded with 1.6 % equity and 98.4 % debt. Its current market...
Suppose Levered Bank is funded with 1.6 % equity and 98.4 % debt. Its current market capitalization is $9.72 billion, and its market-to-book ratio is 1.1. Levered Bank earns a 4.23 % expected return on its assets (the loans it makes), and pays 3.6 % on its debt. New capital requirements will necessitate that Levered Bank increase its equity to 3.2 % of its capital structure. It will issue new equity and use the funds to retire existing debt. The...
Explain fixed and variable inputs and how they should be managed Compare and contrast zero based...
Explain fixed and variable inputs and how they should be managed Compare and contrast zero based budgeting and modified zero based budgeting. Highlight the major differences. Differentiate between debt and equity financing
Arbitra Inc.'s current capital structure is 30% debt and 70% equity. The expected return on its...
Arbitra Inc.'s current capital structure is 30% debt and 70% equity. The expected return on its debt is 5%, its equity Beta is 1.1. The riskfree rate is 2%, and the expected return on the market is 10%. Consider first (in questions (i) and (ii)) the case of perfect capital markets. a) Calculate Arbitra Inc.'s asset Beta and its cost of capital (that is, Arbitra Inc.'s expected return on assets). b) Arbitra Inc. now decides to change its capital structure...
The big trade-off is between efficiency and equity. True False The current approximate debt-to-GDP ratio is...
The big trade-off is between efficiency and equity. True False The current approximate debt-to-GDP ratio is (2018): 105% 379% 234% 77% Milton Friedman argued: drugs should be legalized. drugs should be illegal. that drugs were destroying the U.S. economy and they should be stopped at all costs. that drug laws should be strengthened. The fallacy of composition is an expression that means "other things being equal." a statement about the way the economic world ought to be. the error of...
34. How many of these ratios measure the relationship between debt and equity The debt ratio The equity (proprietorship) ratio The leverage ratio (total assets/total equity) The current ratio a. 1 b. 2 с. 3 d.
Explain fixed and variable inputs and how they should be managed Compare and contrast zero based budgeting and modified zero based budgeting. Highlight the major differences. Differentiate between debt and equity financing
Arbitra Inc.'s current capital structure is 30% debt and 70% equity. The expected return on its debt is 5%, its equity Beta is 1.1. The riskfree rate is 2%, and the expected return on the market is 10%. Consider first (in questions (i) and (ii)) the case of perfect capital markets. a) Calculate Arbitra Inc.'s asset Beta and its cost of capital (that is, Arbitra Inc.'s expected return on assets). b) Arbitra Inc. now decides to change its capital structure...
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