The EBIT-EPS indifference point is a calculation used in determining optimal capital structures. What that means is firms typically finance their operations with two primary means, equity and debt. Back to the indifference point, algebraically and graphically when the earnings per share for debt and equity financing alternatives are equal, you have the EBIT-EPS indifference point. Put another way a firm can finance their operations at the same cost, with either debt or equity, at the indifference point. EPS (debt financing) = EPS (equity financing)
The EBIT-EPS indifference point is a calculation used in determining optimal capital structures. What that means is firms typically finance their operations with two primary means, equity and debt. Back to the indifference point, algebraically and graphically when the earnings per share for debt and equity financing alternatives are equal, you have the EBIT-EPS indifference point. Put another way a firm can finance their operations at the same cost, with either debt or equity, at the indifference point. EPS (debt financing) = EPS (equity financing)
benefit of debt and equity financing
What are the advantages and disadvantages for AMSC to forgo their debt financing and take on equity financing?
it is the mix of debt and equity financing for an organization. it means the ratio of debt and equity in the finance of an organization. it may be debt free and full equity financing and vice versa.
An advantage of bond financing is: a) Bonds do not affect owners' control. b) Interest on bonds is tax deductible. c) Bonds can increase return on equity. d) It allows firms to trade on the equity. e) All of the above.
They are equity financing and debt financing.
One advantage of equity financing over debt financing is that it's possible to raise more money than a loan can usually provide.
RoE = (net profits/pretax burden)*(Pretax burden/EBIT)(*EBIT/Sales)*(Sales/Asset)*(Asset/Equity) (ie) Tax Burden*Intrest Burden*Return on Sales*Asset Turn Over*leverage
An all equity capital structure would be the most conservative type of working capital financing plan approach. The more long-term financing used the more conservative the financing plan, and equity is permanent financing.
Equity financing
Debt financting-taking a loan from a bank Equity financting-selling owership in the company public offering-selling shares of stock on the open market