Answer / shruti

debt and equity bith are types of borrowings that companies
make from general public.
Debt holders are like money lenders, companies are obliged
to pay back the money to debt holders even if its making
loses. They are the first ones who are paid back money even
before equity holders.
Equity holders on the other hand are the owners of a
company. They dont just share profits but also loses that a
company make.

Answer / r.padmalakshmi,student

debt means an amount borrowed by the company and need to be
repaid. equity investments are brought in by the investors
who like to share the ownership.

Answer / manju

Debt is a loan borrowed by a company from financial
institutions like banks and money lenders , etc. They are
provided interest as the remuneration and they are the
creditors of the company.
Whereas equity is collected from general public or
institution through the issue of shares.They get
remuneration in the name of dividends. The holders of
shares are the owners of the company and they take part in
it's affairs.

Answer / sachin sharma

debt is the money which company has a obligation to pay in
any condition.they get predecided interest not profit
equity holder is the owner of company .

Answer / i k pavan

debt means the company must pay the intrest,and it is the
repayable ammount,when the company pay the dividend the
company first prefer to the debenture hoders.
but the equity ammount does not pay,the compny only pay the
dividends,butnot pay any intrest the dividend ammount is
mainl depending on profits of the company.

Answer / abhijeet

Debt means Borrowed Capital(debenture) from borrowers it may
be Financial Institutions, Banks, money lending companies etc.
Fixed amount of Interest is paid to its Debenture holders. &
this type of capital funding is cheaper than Equity
Equity is nothing but raising funds from general public they
have least priority and Dividend is required to be paid only
if there is profit remains for it.

Answer / sheetal kumar garg

debt means loans who provides by any financial institutions
and repaid by the people and on interest rate on fixed on
debt. but equity means cash market who invest in cash it is
highly risky.

Answer / damu1707

Debt means the amount borrowed by the company form outsiders like financial institutions, lending organisation and etc.

Equity means amount invested by it's share holders in business and it's proprietor. they can get the dividends out of profits earned by the company.

Answer / a.dhanabal

Debt Is Borrower From Banks& other Funding Agency.
But Equity Is Individual Contribution And Liable have the
company

Answer / purvi

debts are the loans having fixed return irrespective of
companys health whereas eqiuty returns depend on companys
health
debts are close ended and equity are open ended or both
debts are given first preference on repayment during
bankruptcy whereas equity are given second.

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Sean Alicandri, a sophisticated investor who is both willing and able to take risk, has just noticed that Mid- West Airlines has become the target of a hostile takeover. Prior to the announcement of the offer to purchase the stock for $72 a share, the stock had been selling for $59. Immediately after the offer, the offer the stock rose to $75, a premium over the offer price. Such premiums are often indicative that investors expect a higher price could occur if a bidding was erupts for the company or if management buyout of the firm. Of course, if neither of these scenarios occurs, the price of the stock could fall back to the $72 offer price. In addition, if the offer were to be withdrawn or defeated by management, the price of the stock could fall below the original stock price. Alicandri has no reason to anticipate that any of these possibilities will be the final outcome, but the realizes that the price of the stock will not remain at $75. If a bidding war erupts, the price could easily exceed$100. Conversely, if the takeover fails, he expects the price to decline below $55 a share, since he previously believed that the price of the stock was overvalued at $59. With such uncertainty, Alicandri does not want to own the stock but is intrigued with the possibility of earning a profit from a price movement that he is certain must occur. Currently there are several three months put and all options traded on the stock. Their strike and market prices are as follows: Strike Price Market Price of Call Market Price of Put $50 $26.00 $0.125 55 21.50 0.50 60 17.00 1.00 65 13.25 1.75 70 8.00 3.50 75 4.25 6.00 80 1.00 9.75 Alicandri decides the best strategy is to purchase both a put and a call option (to establish a straddle). Deciding on a strategy is one thing; determining the best way to execute it is quite another. For example, he could buy the options with the extreme strike price (i.e. the call at $80 and the put at $50). Or he could buy the options with the strike price closest to the original $72 offer price (i.e. buy the put and the call at $70). To help determine the potential profits and losses from various positions, Alicandri developed profit profiles at various stock prices by filling in the following chart for each position: Price of the stock Intrinsic Value of the Call Profit on the Call Intrinsic Value of the Put Profit on the Put Net Profit $50 55 60 65 70 75 80 85 To limit the number of calculations, he decided to make three comparisons: (1) the purchase of two inexpensive options-buy the call with the $80 strike price and the put with the $60 strike price, (2) the purchase of the options with the $70 strike price, and (3) the purchase of the options with the price closest to the original stock price (i.e., the options with the $60 strike price). Construct Alicandri’s profit profiles and answer the following questions. 1) Which strategy works best if a bidding war erupts? 2) Which strategy works best if the hostile takeover is defeated? 3) Which strategy works best if the original offer price becomes the final price? 4) Which of the three positions produces the worst result and under what condition does it occur? 5) If you were Alipcandri’s financial advisor, which strategy would you advise he establish? Or would you argue that he not speculate on this takeover?

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