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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.
The conflicting interests of users We have seen above that every user group looks at a business from a different perspective and has its own individual interests. This means th
Income statement2013 2012 2011 Net revenue 5,075,390.. 4,763,180.. 4,158,507 Cost of goods 1,377,242.. 1,297,102.. 1,134,966.. Gross profit 3,698,148.. 3,466,078.. 3,023,541 Total
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Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1 - X2 = 2 X1, X2 = 0
You are the CFO of Diversi?ed Industries. Diversi?ed has suffered through 4 or 5 tough years. This has deteriorated its ? financial condition to the point that Diversi?ed is in dan
Q. What do you mean by Bankruptcy? Bankruptcy - Legal process, governed by federal statute, whereby the DEBTS of an insolventperson are liquidated after being satisfied to the
Legal Aspects There is no law relating to branch accounts but examination problems under this heading are frequently linked to either partnership or company account problems. Ans
Most firms build and keep inventories in the course of doing business. Manufacturing firms hold raw material, finished goods and spares and work in process in inventories. Financia
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