0
What else can I help you with?
What is the difference between preference share and debentures?
Debenture and Preference shares are often confused with each other,, Basically Preference share is an equity type instrument but debenture is a straight forward loan. Debenture bear fixed interest and its a TAX deductible expense. Company may goes into liquidation if it fails to pay interest on debenture. on the other hand company pay wish to choose not paying any dividend to preference share holder in any given period. debenture holder are lender to company Preference share holder owns the company
Advantages and disadvantages of preference share?
Some of the advantages of the preference share is the absence of the fixed regular income and less capital loses. Some of the disadvantages includes the dilution of claim over assets and the high rate of dividends.
Is cost of equity capital less than cost of debt capital?
Cost of equity > Cost of debt Reason: When u issue debt, for example in the form of bonds, u have to pay bondholders interest. This interest is tax deductible. On the other hand, when u issue equity, i.e. stocks, u pay dividends. This dividend is taxed as corporate income. Because of the ability of debt to escape taxation vis-a-vis equity, cost of debt is lower than cost of equity. In fact, this is called a debt tax shield.
Why does the weighted average cost of capital of firms that uses more debt capital lower that that of a firm that uses less debt capital?
Because the cost of debt is generally lower than the cost of equity. This is because in case of financial distress, debt-holders are repaid before the equity holders are, as well as because debt has the assets of the firm as collateral and equity does not.
Does stock dividend increase owner's equity?
No, all it does is give each shareholder more shares but each share is of proportionately less value. Net-net, the only impact is to reduce share price.
When borrowing is less than equity the company is said to be?
Trading equity
Is owners equity equal to the business liabilities less the business assets?
No. Owners Equity is equal to Business Assets less Business Liabilities.
The rate earned on stockholders' equity will be less than?
The rate earned on stockholders' equity will be less than the return on assets if the company has significant debt, as interest expenses reduce net income without affecting total assets. Additionally, if the company's return on investment is lower than the cost of debt, the overall return on equity will be diminished. Therefore, high leverage can lead to a lower rate of return for equity holders compared to the overall asset performance.
How does beta affect the cost of equity in finance?
Beta measures a stock's volatility relative to the overall market, reflecting its systematic risk. A higher beta indicates greater risk, leading investors to demand a higher return, which increases the cost of equity. Conversely, a lower beta suggests less risk and results in a lower cost of equity. Thus, beta is a crucial component in the Capital Asset Pricing Model (CAPM), which calculates expected returns based on risk.
Why the increased use of debt increases the financial risk of the equity shareholder and hence the cost of equity increases?
Increased use of debt amplifies financial risk for equity shareholders because debt obligations must be met regardless of a company's performance, leading to higher volatility in earnings and cash flow. This heightened risk makes equity less attractive to investors, who demand a higher return to compensate for the increased uncertainty associated with leveraged firms. Consequently, the cost of equity rises as shareholders require greater compensation for the risk they undertake.
How can the price of a company's share be less than the face value of the share?
How can the price of a company's share be less than the face value of the share?" How can the price of a company's share be less than the face value of the share?"
How much money can you get from reverse mortgages?
It varies depending on how much equity you have in your home. If you have a lot of equity, you can get more, if you do not, then you will get less.
