This paper examines the advantages and disadvantages of two different financing mechanisms for businesses - debt financing and equity financing.
Written in 2009; 1,490 words; 5 sources; APA; $ 49.95
Paper Summary:
The author of this paper discusses the US power company, American Superconductor, and its financing strategy. In particular, the paper examines two forms of financing structures used by the company - debt financing and equity financing and discusses the advantages and disadvantages of each system.
Outline:
Introduction
Advantages of Debt Financing
Disadvantages of Debt Financing
Advantages of Equity Financing
Disadvantages of Equity Financing
References
From the Paper:
"In terms of payments distribution, equity financing has the advantage that the shareholders are generally paid only once a year. And this occurs at the end of a fiscal year, when the company has counted and established the distribution of their profits. Even more, unlike the monthly payments that have to be made with the debt financing, equity financing allows American Superconductor to use the money that would have constituted the bank reimbursement to further develop their business.
"The advantage of this payment system also materializes in that the company does not have to make any payments until the end of the fiscal year; in other words, they get free money that can help them start their business or finance a new project that is expected to retrieve positive financial results (Advani, 2006). Foremost, at the end of the year, the company can even reach an understanding with the shareholders to minimize or even eliminate dividend payments and invest the money into further developing American Superconductor."
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