Which one is best to company either debt or equity?
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Answer / ankita dabas
Whether a company issues debt or equity is a function of
the type of business we are considering. If it is a young
or a stratup company then it may not have the requisite
cash flows to service the debt or may get debt at a very
high rate, therefore the company would choose to raise cash
through equity. Whereas a well established business with
stable cash flows will be able to service its debt
comfortably and would therefore raise debt. Also the asset
base of a company determines how easily a company can raise
debt or not.
| Is This Answer Correct ? | 20 Yes | 0 No |
Answer / chetanaroopa
either debt or equity of a company depends up on 3
aspects. They r control,cost,risk.According to control
point of view debt is good for a company,and aaccording to
cost point of view equity is good and risk point of view
equity is best. According to debt equity ratio 2:1 is the
norm accepted by financial institutions for financing a
project.
DEBT EQUITY RATIO = LONG TERM DEBT
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SHAREHOLDERS FUNDS
| Is This Answer Correct ? | 6 Yes | 0 No |
Answer / babji.s
either debt or equity depend upon the capital structure of
the company. no one company want more debt or more equity
than debt . because there are benifits and losses in both
methods . the ratio of debt and equity is depend opon the
company nature and place and and external environment also.
| Is This Answer Correct ? | 4 Yes | 1 No |
Answer / azwar.j.khan
For a company neither 100%equity nor 100%debt is good.Its
all depend upon n-number of factors such as company current
status,its nature of business,its future prospects etc.but
the ideal is 1:1 ratio.I would like to add that this ideal
ratio is not fixed it should change as per the need.
Both equity and debt has its own features, such as equity
fund means company do not have to return the principal
amount during life time of the company and no pressure to
give dividend,but the holder has the right to book more
profit through its share price,and to participate in AGM and
can give their views.
Debt fund make pressure for returning principal amount at
the time of maturity and to pay back the interest at regular
interval, at the same time it help on "TRADING ON
EQUITY".Which help the share holder and the company on the
long run
| Is This Answer Correct ? | 3 Yes | 0 No |
Answer / laxman
who is willing to take risk for them equity is good and you
his not willing to take risk for them debt is good,in which
equity shares provid the devidend and debt provide the
intrest,equity shares suitable for young who is working in
some where they are ready to take risk because they have a
regular income and debt shares suitable to old who is not
working in some where they are not ready to take risk for
them it is good, but both are importent to the company to
continue its business.
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / himanshu nirkhe
it is depend upon the nature of the company and their
business expanding policy.But 2:1 is the idle ratio.
The modi-miller approach is suitable.
| Is This Answer Correct ? | 1 Yes | 0 No |
Equity is always best for the company because
Equity is the companies own capital, Company neet to pay in
the loss, whereas debt securities entiles to regular
payments regardless of how organisatins perform financially.
so, debts are liabilities and that has to pay back with
interst.
| Is This Answer Correct ? | 3 Yes | 3 No |
Answer / rahul
the appropriate mix of the captial is vital for the company
because it will be helpful for reducing the cost of
capital.Generally the debts are best for company because it
reduce the tax burdan and having fix rate of return.But
equity having more expected rate of return than debts.
| Is This Answer Correct ? | 1 Yes | 1 No |
Answer / dr.ravi kumar gupta
i feel that debt equity ratio decide the company capability
,i.e the paying capacity of debt ,so the ratio should be
greater means 2:1.
| Is This Answer Correct ? | 0 Yes | 0 No |
Answer / nitin nischal
according to me debt equity ratio 2:1 is more preferrable
as it is declared by financial institution . because
campany wants to shifts the burden on outsiders by
borrowing debt rather than through its internal source i.e
equity
| Is This Answer Correct ? | 0 Yes | 1 No |
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