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which debt instrument is prefered by the campany for
financing?
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Answer / sagar dilip shinde
Company preferably uses Debentures for financing because it
has to pay a fixed amount of interest for the period for
which it has taken the debentures.
There is also risk involved in financing through debentures
but this risk is for a short period and con be overcome.
Also financing is done through studying the capital
structure of the company Like-
1)through equity shares and debentures
2)only through debentures
3)only through Equity shares
4)through preference shares and debentures
5)through preference shares , equity shares and debentures
These capital structures need to be studied and after
finding which capital structure yields higher earnings per
share is selected for financing.
EPS is calculated after deducting interests and taxes from
EBIT. this value arrived is known as EAT and it is divided
by No of shareholders.
| Is This Answer Correct ? | 4 Yes | 0 No |
Answer / anjali
debt instruments are generally preferred because debt is
cheaper source of capital and as its interest is not taxable
so it provides shield against income tax.the various sources
of debt instruments are
a notes
b bills
c Commercial paper
d mortgages
e leases
f bonds
the most perfered instrument is bonds.
| Is This Answer Correct ? | 3 Yes | 1 No |
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