MOD 5 FIN 301 CA Essay Example | Topics and Well Written Essays - 750 words

MOD 5 FIN 301 CA - Essay ExampleThis writing aims to analyze the advantages and disadvantages for AMSC to forgo their debt financing and take on comeliness financing.AMSC can use its capital from equity financing to invest in the project or business without carrying the burden of debt on its back. In a period of financial turmoil, where businesses are faced with a credit crisis, equity financing helps in providing the obligatory cash and reduces the risk of bankruptcy. By forgoing debt financing, AMSC is gaining a major advantage by using the cash to grow its business rather than paying a bank loan. Equity financing also brings smart resources with itself such as valuable human capital which can provide necessary skills, contacts and experience to electric discharge the business. In addition to that, as the business grows over the period of time the investors are often will to provide additional mount in case if it is needed so AMSC can have retrieve to future sources of fund ing with the current owners. The owners of the equity can control the business without any interference from the creditors since the telephoner will have no debt obligations. The biggest advantage lies in the fact that the business will be needy from any interest costs thus it can boost its profits. Furthermore, during a recessionary period where there is a lack of credit in the economy, AMSC can have a chance to obtain funding through debt financing since it will have a lower Debt-to-Equity ratio. Financial institutions often extend impute to those corporations who have a lower Debt-to-Equity ratio in their balance sheets thus AMSCs ability to follow will be improved. Too much debt financing can tarnish the reputation of AMSC if they have already huge liabilities on their books. Finally, Corporations also collateralize their important assets due to debt financing and creditors impose certain miserly rules and regulations on the use of those collateralized assets which limits the ability of the organizations to use those assets