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Q. Risk and Return - issue of debt?
Raising debt finance will raise the gearing and the financial risk of the company while raising equity finance will lower gearing and financial risk. Financial risk occurs since raising debt brings a commitment to meet regular interest payments whether fixed or variable. Breakdown to meet these interest payments gives debt holders the right to appoint a receiver to recover their investment. In contrast there is no authentication to receive dividends on ordinary shares only a right to participate in any dividend (share of profit) declared by the directors of a company. If profits are low then dividends are able to be passed but interest must be paid regardless of the level of profits. Moreover increasing the level of interest payments will increase the volatility of returns to shareholders since only returns in excess of the cost of debt accrue to shareholders.
Potential advantages to BNM Narrative reporting will enable BNM to provide information about social, economic and environmental policies. Many users are influenced by an entit
Indicate how each of the following transactions affects the accounting equation. a.Purchase of supplies on account. b.Payment of wages. c.Cash sale of goods for more than their cos
In the current year, Madison Corporation had $50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a warranty l
The dividend yield as well as capital growth for 2004 must be calculated with reference to the 2003 end-of-year share price. The dividend yield is 0·56% (100 × 2·8/500·8) as well a
how should i treat items in the additional information
In the context of the public sector, discuss incremental system of budgeting and evaluate their strengths and weaknesses
Seattle Health Plans currently uses zero debt financing. Its operating income (EBIT) $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assests and because
DEBTOR'S PROPERTY AT COMMENCEMENT OF BANKRUPTCY 1) Doctrine of "relation back" : The trustee's title to the debtor's property is deemed to relate back to the commencement o
PROPERTY TRANSFERRED BEFORE BANKRUPTCY (a) Voluntary settlements : The trustee can claim all property settled by the bankrupt on other persons within two years preceding the
1.The debtor retains ownership, but loses possession and control of his property
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