Abstract This paper examines how choosing which financing vehicle is best for a company is very important and how equity and debt financing are financial mechanisms by which a firm can raise financial capital. It looks at how the characteristics of each of these two groups depend on three variables: investors' claims on future cash flow, their right to participate in company decisions and their claims on company assets in liquidation. The paper examines the benefits and disadvantages of both.
Outline
Introduction
Characteristics of Equity Financing
Advantages of Equity Financing
Disadvantages of Equity Financing
Characteristics of Debt Financing
Advantages of Debt Financing
Disadvantages of Debt Financing
Contrast Between Equity and Debt Financing
The Capital Structure Decision
The Irrelevance Proposition
Conclusion
References
Appendix
From the Paper "Equity financing is the act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. Equity (or common stock) offers residual claims. On a balance sheet, equity equals total assets less all liabilities. Equity financing is generally recommended for a business that's experiencing very high growth with high investment risk. The major sources of equity financing include individuals starting the business, friends and family, angel investors, venture capitalists, and public equity markets. Equity can take several forms including preferred stock, common stock, limited partnership interest, and project equity."
Abstract The paper provides an introduction to the McDonald's company and examines McDonald's shares, equity ratio, shareholders, dividend policy debt-to-equity ratio and the company's amount of debt. The paper includes tables and a graph as an appendix to the paper.
Outline:
Introduction
Capital Structure
From the Paper "McDonald's is the world's most famous fast-food chain. It operates and franchises McDonald'srestaurants, which offer various items of fast-food, soft drinks and other beverages. Approximately 70% of McDonald's restaurants are operated by independent franchisors. The number of restaurants in the U.S. has reached saturation and most new McDonald's are now being opened in Europe, Middle East and Asia.
"As of August 2007, McDonald's operated approximately 31.045 restaurants in 118 countries. The company itself employs around 465.000 full-time workers. McDonald's also owns Boston Market restaurant chain and moreover has a minority interest in the Pret-A-Manger, an English coffee and sandwich shop."
Abstract This paper discusses the advantages and disadvantages of the use of the sinking fund in corporate bonds from the viewpoint of the corporation and the bondholders. This paper also discusses the advantages and disadvantages of the call provision from the viewpoint of the corporation as well as its bondholders. These elements carry heavy weight when considering expansion into an international market. The corporation's current status and ratings play a big role in what kind of financing is available and what kind of future debt will be acquired. Key members of management must keep all areas of performance in mind when formulating a strategy for entry. With this in mind, the paper also analyzes factors that effect performance such as bonds yield to maturity. The writer explores the issue of risk as a constant factor evident in business. It can be seen as both a positive and a negative. Risk affects all facets of the corporation, not only the foreign subsidiary but also company performance. It is therefore important to include a risk assessment as a part of any global strategy.
Introduction
Role of Debt Over Equity The Sinking Fund
The Call Provision
Factors Effecting Yield to Maturity
Factors Effecting Risk
Conclusion
From the Paper "The role of debt over equity is important to consider as a company expands, as it is a true indicator of how the company will succeed. It describes how the company manages its money in its balance sheets. It refers to money the company owes and does not expect to pay off within the next year. In business, there are long term and short term debts. These debts are categorized by how lengthy a repay period there is with the creditor. A good sign that the company is succeeding is when the equity outweighs the debt or that the debt is getting smaller over time. This indicates a certain amount of health within the organizational structure. However, companies with more long-term debt than short-term debt find themselves in trouble because they must continue to pay interest payments and risk having little working capital. It is important a company pay close attention upfront when borrowing money and note the interest rate of the loans as some fall privy to market fluctuation. Long-term debt is more volatile as interest rates can be influenced by economic changes. It is important to analyze how a new international location is doing before committing to entry there. Still interest rates plays a dramatic role in how banks rate a company the ability to pay on time. In this way it benefits the banks more as they are able to "spur innovation to extract return for investors via new structures, some involving high leverage" ("The Financial Stability Conjuncture and Outlook" 51). Debt always works to benefit the banks in this way."
Tags: bonds, sinking, funds, corporate, bonds, market, international
Abstract This paper looks at the Chevron Corporation's businesses that include petroleum operations, transportation, manufacturing, marketing operations and chemical operations. The paper examines Chevron's market structure and how it operates within an oligopoly and discusses how Chevron is involved in a variety of technology fields that are intent on seeking out, developing and producing both oil and natural gas. The paper also analyzes the cost structure of Chevron, their debt-to-equity ratio, variable costs, price elasticity of demand and how government regulations may affect Chevron's supply and demand. The paper asserts that with the large market share that Chevron has in the energy industry, its diversity regarding technological advances and businesses, and its selling of nonproductive assets, Chevron has a bright future.
From the Paper "Chevron Corporation operates as an international, integrated energy company and has close to 63,000 employees located throughout the world. It operates in the Oil, Gas, Consumable Fuels industry. Chevron is a Fortune 500, publicly traded corporation with its stock listed with the New York Stock Exchange (CVX). It consolidates different businesses into its corporate operations. These businesses include: petroleum operations; transportation, manufacturing, and marketing operations; chemical operations and a variety of others."
Abstract The paper defines "owner's equity" and explains that the portion in a balance sheet of a corporation relating to the equity of stockholders include the paid-in or contributed capital invested and also the retained earnings. The paper continues and explains the various financial terms in analyzing stockholder's equity and relates the situation of owner's equity.
Outline:
Introduction
Why is it important to keep paid-in-capital separate from earned capital?
As an investor is paid-in or earned capital more important? Why?
As an investor, are basic or diluted earnings per share more important? Why?
From the Paper "The 'Paid in capital', is often categorised more particularly as 'paid in surplus' 'additional paid in capital' or 'capital surplus'. These are differentiated from 'Retained Earnings' or in terms of its earlier distinction, 'Earned Surplus'. 'Retained Earnings' are differentiated from the 'paid-in-capital' or 'contributed capital', which indicates to the capital obtained in lieu of the stocks, that is often indicated by the 'Capital Stock' or that of 'Capital Surplus' and 'Donatee Stock' or 'Donated Surplus'. The 'Stock Dividends' which is the sharing of extra shares of capital stock having no cash receipt-decrease the 'Retained Earnings' and enhance 'Capital Stock'. The 'Retained Earnings' also known as 'Earned Capital' including the aggregate of all capital accounts appear to be the net worth of a company."
Abstract This paper reviews five different articles about brand equity. The paper examines how each article treats the consequences of an organization adopting a brand equity stance. The paper also discusses the different meanings of the term brand equity to marketers vs. accountants.
Abstract This paper addresses the significance of debt with reference to three African countries namely, Angola, Benin and Liberia. It suggests possible ways in which these countries can solve their debt problems, including restructuring of debts.
Tags:debt, debt crisis, sub saharan africa, default, world bank, debt repayment, economic reform, dictatorships, socialist, civil war
Abstract This paper examines the dimension of Kenya's national debt. It describes the enormity of the debt in human terms, as the author writes that the cost of paying just the interest alone on the debt is far larger than what the government spends on healthcare. The paper investigates the true motives of the Poverty Reduction Strategy.
Table of Contents
Introduction
Poverty Reduction Strategy
Purpose of the Poverty Reduction Strategy
Political Consequences
Political pressure by IMF
Internal violence
Conclusion
In Text Citations
From the Paper "Africa spends four times more on interest on her loans than on healthcare.
"The issue of Third World debt is one that cannot be ignored or wished away. In just 10 years, it escalated from a little over $400 billion in 1980 to a staggering $1.3 trillion in 1990. Kenya's eternal debt is more than $7 billion". Nairobi (The Nation, October 13, 1998) ""
Abstract A paper concerning the Nantionall Debt and its impact on the U. S. economy. As a nation of shoppers, most Americans are heavily in debt. How does all this debt affect the economy?
Abstract The paper presents a review of the issue of the national debt: causes, effects, and possible solutions. It looks at the history of the national debt, how it measures the net effect of fiscal policies and reviews effects and what the increase in the national debt means.
From the Paper "This research examines the issue of the national debt in the United States together with what if anything should be done about the national debt. When one speaks of the national debt one is referring to the monetary obligations of the United States Treasury. Such obligations are created by the United States Treasury through the issuance of monetary obligation instruments... "
Abstract This paper examines methods whereby US homeowners' debt load can be reduced and ultimately eliminated while building wealth as homeowners. To this end, this paper provides an overview of the current financial situation facing many Americans, followed by an analysis of how some people have approached these dual goals. A summary of the research and salient findings are provided in the conclusion.
Outline:
Introduction
Review and Discussion
Background and Overview
The Path to Debt Elimination and Wealth Accumulation
Debt-Reduction and Wealth-Accumulation Strategies for the Whittingtons
Conclusion
References
From the Paper "On the one hand, the need for debt elimination strategies is more pronounced today than ever. Many American families that have worked diligently for years now find themselves little better off - or in many cases worse off - than they were a decade ago. In fact, in the United States, almost one-half of the wealth is in the hands of just 3.5 percent of the households, and the majority of the other households do not even approach the upper levels (Stanley & Danko, 1996). In this regard, Reich (2001) reports that, "The dirtiest little secret about the Roaring Nineties is that average working families gained almost no income, while their health care costs soared. From 1986 through 1997 (the latest year for which detailed IRS data are available), the average income of the richest 1 percent of Americans rose 89 percent, to $517,713" (p. 56). During this same period of time, though, the average income of the bottom 90 percent of Americans increase a meager 1.6 percent, to just $23,815 after all federal income taxes were paid (Reich, 2001). At the same time, healthcare costs increased even faster than inflation, a trend that especially affected middle-income Americans families; by the end of the 1990s, fully 44 million Americans lacked health insurance, almost 8 million more than those without health insurance a decade earlier (Reich, 2001). Furthermore, by the end of 1997, even those who were insured paid substantially more, through higher co-payments, deductibles, and premiums (Reich, 2001). Likewise, consumer debt because of credit card use is at an all-time high, and Brown (1999) suggests that, depending on their personal circumstances, consumers should first eliminate this source of debt as a debt-reduction strategy because of the exorbitant interest rates involved: "[Consumers] should carry out an aggressive debt-reduction strategy over the next three to five years in order to eliminate their outstanding debt. Otherwise the interest from their credit cards will erode the profits from any portfolio. Earning 10 percent to 12 percent on your investment portfolio and paying out 18 percent to 21 percent in consumer debt doesn't help you realize a profit on your portfolio, no matter how well you are invested" (Brown, 1999, p. 60)."
Tags:debt, elimination, wealth, accumulation, mortages, retirement, budgeting, homeowners, middle, income
Abstract This paper examines the effect of Japanese debt on economic growth. The author considers the possibility that the Japanese debt could cripple the entire world economy. Economic growth is discussed not only from the standpoint of Japan, but also from the standpoint of other members of the world economy. The author presents background information on the economic rise, and potential fall, of Japan. The paper also consists of prominent models and theories that are presented and explained, to illustrate the economic effects of the debt of the Japanese government. Paper includes charts and tables.
Outline:
Abstract
Theory
Data
Conclusions
From the Paper "In order to put the significance of the consideration of Japanese economics into perspective, consider for a moment the fact that Japan is the second world economic superpower, behind the United States (Witter, 1997). Keeping that in mind, there are several key economic indicators that show a true storm brewing within the Japanese economy due to the debt of the Japanese government; for example, current figures show that the debt of the Japanese government outweighs their GPD (Gross Domestic Product) by an obscenely high 170%, the Japanese National Bank is insolvent, and there is a glut of outstanding JGBs (Japanese Government Bonds (Posen, 2000). While all of these statistics are staggering, there are some very informative models and theories that illustrate this problem in greater depth; the best of these models and theories will now be presented and discussed in an effort to add another dimension to this research and provide a complete understanding of not only the topic, but also its significance to everyone in the developed world and beyond."
Abstract A paper discussing the debt problems (and possible solutions) of Mozambique. Racked by past civil war and governmental mismanagement in addition to a current flooding crisis, Mozambique is struggling to survive. While successful efforts have been and are being made, the country still relies on foreign aid to balance the budget. A combination of debt cancellation and knowledge seems to be the only answer.
Abstract This paper discusses the idea that management has the option to make debt a permanent part of the company's capital structure. It contends that in a regulated, mature industry such as a public utility, this can have many wealth-enhancing benefits for the stockholders.
From the Paper "Debt tends to have a negative connotation in most people's minds. In personal finance it represents assets that will need to be given away later in life. But corporations have an unlimited life span. This and other factors give management the option to make debt a permanent part of the company's capital structure. In a regulated mature industry such as a public utility this can have many wealth-enhancing benefits for the stockholders. The fundamental law that applies to all financial analysis is the ..."
Abstract This paper discusses the disparity has long existed between men and women in occupational equity, explaining that these changes, for several possible reasons, began to take place during the Neolithic Revolution. The paper also looks at the substantial changes that have been made in the last two centuries through reform acts, legislation, and social movements while also pointing out that, in spite of the great strides that have been made in these areas, women still face difficulties in rising through corporate ranks.
From the Paper "Men and women have always seemed to occupy different places in the work force. Women have typically taken the role of gatherer, caregiver, nurturer--passive roles, in most cases, in which they stayed close to the family or larger tribal unit. Men, on the other hand, have roamed far from the central group as hunters, warrior, and protectors of the social order. In today's world, the wide gender gap of the nineteenth century has changed substantially to the very narrow spectrum of differences seen today."
