What are the main differences between corporate debt and
equity? Why do some firms try to issue equity in the guise
of debt?
- 8 Answers
- 20455 Views
- Pepsi, I also Faced
- E-Mail Answers
Answer Posted / a.b.
Firms try to issue equity under the guise of debt because
the firm can take a deduction on all interest paid
throughout the year. Thus, the firm can enjoy pass-through
taxation, theoretically, on the payment of the interest
because those dollars are tax-free. This reduces the
overall taxable income of the firm, which reduces the tax
burden, which may even result in more money to distribute as
dividends to those equity holders. It's a win-win situation
for all, except the IRS. Thus, the IRS/Congress created 385
of the Internal Revenue Code which allows the IRS to
evaluate corporate debt to determine if it is essentially
equity under the guise as debt and treat it as such.
The above answers regarding the nature of debt and equity
are correct for the most part, but do not go far enough to
answer the question asked.
| Is This Answer Correct ? | 3 Yes | 1 No |
Post New Answer View All Answers
I am Simrat Kaur. I am persuing graduation from P.U. I have an experience of 14 months as a CSA. But i hav an experience letter of 6 months.But I can show my joinin letter of the other job. I hav knowledge of basics of computer & internet. Actually, m findin job in chandigarh. I am findin the right opportunity. so, Can u plz help me in findin the right job?? Can u plz tel me abt where interviews r goin on?
Occasionally it is said that issuing convertible bonds is better than issuing stock when the firms shares are undervalued. Suppose that the financial manager of Decent Furniture Company does in fact have inside information indicating that the decent stock price is too low. Decent furniture earnings will in fact be higher than investor’s expectations. Suppose further that the inside information cannot be released without giving away a valuable competitive secret. Clearly, selling shares at the present low price would harm Decent’s existing shareholders. Will they also lose if convertible bonds are issued? If they do lose in this case, is the loss more or less than it would be if common stock is issued? Now suppose that investors forecast earnings accurately, but still under value the stock because they overestimate Decent’s actual business risk. Does this change your answer to the questions posed in the preceding paragraph? Explain.
hat is the meaning of the capital ique,and hat is capital,and ahat is ique
I want to know that , If we called a person for one day for drive our company van or any other purpose. so how it will accounted in our (i.e companies) Books of accounts....
In the case of Internal Reconstruction of company Accrued Int. On debenture / Outstanding int. On debenture transfer or not in capital reduction a/c . Explain
what is rate of service tax and form no. of service tax ? wt rules of service tax a particuler once .?
what is the abrevation for JJ in form jj
1) What is the steps of delisting the listed company 2) How to spliting the listed company shares 3) Which way the company should function when it has paidup capital is equal or more than 5,00,00,000/- (I mean which way the company should do it work in the company Act 1956. Is the company have to appoint a CS and and managing director of a any other things which is compulsory for these kind of company which paid up capital is 5,00,000/-
STATE THE DIFFERENCE BETWEEN BANKING FIS AND NON BANKING FIS
How to analyse the day to day sensex Points or Forex Values?
Does provisions need to be subtracted from reserves if net worth is calculated on the basis of share capital based method
How often is the stock market ticker updated? 15sec? 30sec?
when will be appsc exams will held pls give me the dates
i have cleared c.s inter. for the purpose of training i want to know the companies who are providing training of c.s in punjab state.please help me in this.
I want to validate Customer credit payment with customer invoice, When billing time, the system check the customer credit payment, if customer credit is lesser than customer bill, system should not allow the billing further process. Can I configure in sap
