Raising Corporate Capital Issues
It appears fairly clear that the most advantageous means of raising capital for a corporation is to sell common stock. However, it is critical to realize that there are other things that a corporation must do in addition to selling common stock to make this method provide the degree of efficacy that the corporation desires. The reason that selling common stock can help to raise capital for the corporation is that it is possible to get many different people to invest in the company through this means. However, these individuals will tend to do so in greater numbers and in ways that continue to benefit the corporation if the company itself excels. Specifically, the company must simultaneously focus on its core business and keep abreast of its competition so that it can continue to generate revenue and, hopefully, provide the sort of profit margins that are viewed by common stock investors as lucrative. Moreover, once a company is seen to increase its profits regularly, it is possible for the company to sell its stock at a higher value. Doing so, of course, helps the corporation to increase the amount of capital it is able to raise via this method. Additionally, it is worth nothing that oftentimes, from the perspective of the corporation, it is more advantageous to sell common stock than preferred stock. There are a couple of reasons to substantiate this viewpoint. Firstly, the dividends...
Furthermore, one of the returns that common stockholders get is a vote on the board of directors and the means to sway what sort of policy is adopted by a corporation. Many common stock shareholders would rather sell their shares than attempt to effect change this way.
The response in student posting 1 seemed extremely thoughtful, and for the most part, well planned out. This student cited one of the most salient factors in regards to determining the best way to raise capital for a publicly traded company: its size. Although the fact that such a company is described as one that is traded publicly implies that this is a large company, its current degree of success, market share, and size help to influence the most prudent means of raising capital through the means of bonds, common and preferred stock options. Additionally, the student's analysis of the rate of interests for bonds was particularly astute, especially when compared to the rate of interest for other forms of borrowing. Moreover, the fact that the student mentioned that interest paid on bonds is tax deductible factors into this method of raising capital as well. The student considered…
Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first." The equation to calculating the internal rate of return is a
Bond-buyers are also traditionally older and might have been more leery about investing in a new technology such as the Internet during the 1990s. The choice of these companies to pay a higher rate of return to compensate for the greater risk would have defeated the purpose of the corporation issuing bonds in the first place, as what makes the issuing of bonds so attractive is that the interest rates
Capital Financing Financial planning and working capital management are two processes that enable capital financing in business. Financial planning uses projections and calculations to determine investment requirements where working capital management enables flexibility in business cash flow that meets the needs of the business. Marketable securities are good sources to park cash and enable that cash to raise capital to meet future business needs. It is important to consider appropriate diversity
Capital Asset Pricing Model and Arbitrage Pricing Theory: Capital Asset Pricing Model (CAPM) is an arithmetical theory that describes the relationship between risk and return in a balanced market. The Capital Assets Pricing Model was autonomously and simultaneously developed by William Sharpe, Jan Mossin, and John Litner. The researches of these founders were published in three different and highly respected journal articles between 1964 and 1966. Since its inception, the model
Capital Structure Decision and Cost of Capital In basic terms, capital structure has got to do with how companies finance their overall operations using various sources of funds. In this text, I recommend what is in my opinion the optimal capital structure for the three companies selected for purposes of this discussion. The companies that will be used for purposes of this discussion are: Alaska Air Group, the Clorox Group, and
Furthermore, capital gains normally tend to be spread across a wider income scale than many believe. According to the IRS Individual Income Tax Returns, Preliminary Data, 1992 federal income tax returns, 55% of returns claiming capital gains were from incomes of $50,000 or less, including a capital gain (Thorning, 1995). What this information appears to come down to is that the capital gains tax affects almost everyone, which happens