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Which one is best to company either debt or equity?
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Answer Posted / 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
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