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Calculation of Net Income By Homework Help Classof1
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"a. What net income would Ravine Corporation have reported for each of the years, assuming Ravine accounts for the inter corporate investment using (1) the cost method and (2) the equity... More > method? b. Give all appropriate journal entries for 20X8 that Ravine made under both the cost and the equity methods. "< Less
Types of Hybrid Instrument By Homework Help Classof1
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"Hybrid financial instruments are securities issued by a company that combine features of both equity and debt. Typically, they offer investors • a fixed income for several years,... More > and • The opportunity to acquire equity stocks in the company, on or after a specified future date. "< Less
Setting a Suitable Target Leverage Level By Homework Help Classof1
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"• A company must meet its debt payment obligations otherwise its loan creditors could expose it to action. When debt obligations are high, profits must be sufficient to cover them. •... More > Profits available to stockholders, after paying debt interest, can fluctuate sharply from one year to the next. The risk for stockholders therefore can be very high. A change in profits (before interest) of a given percentage amount will result in a bigger percentage change in profits (after interest and tax) for stockholders. This percentage change will be larger for more highly geared companies. "< Less
Raising New Equity By Homework Help Classof1
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A public offering is the offer of new stocks for sale to the general investing public. This is a common method of stock issue. An offer for sale can involve both the sale of existing stocks, so that... More > existing holders are simply selling their stocks on the market. This is a common method of achieving an exit for venture capital investors, where the rationale for the IPO is achieving a market for the investors’ stocks rather than raising new capital, and the offer of new stocks to the market, so that the company is raising new equity finance.< Less
Equity Warrant Bonds By Homework Help Classof1
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Equity warrant bonds are bonds issued with equity warrants attached. Warrants are similar to share options, and give their holder the right but not the obligation to subscribe for a fixed quantity of... More > equity stocks in the company at a future date, and at a fixed subscription price (exercise price). When bonds are issued with warrants, the warrants are detachable and can be sold in the stock market separately from the bonds.< Less
Optimal Capital Structure By Homework Help Classof1
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The optimal capital structure for a company should be the mix of equity, debt and hybrid instruments that minimizes the overall cost of funding, i.e. it should minimize the company’s weighted... More > average cost of capital. In practice, however, it is not possible to specify this optimal capital structure exactly, for any individual company.< Less
Matched and Unmatched Funding By Homework Help Classof1
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Equity funding is perpetual, (except in the rare cases where companies buy back and cancel some stocks) debt capital has a finite duration and must be repaid on or before maturity. A borrower has to... More > decide the required term (maturity) for each new debt. For a major corporate borrower, debt can be of almost any duration.< Less
Debt Profile Management By Homework Help Classof1
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A company’s non-financial managers should be involved in setting the target leverage level and implementing action that moves the company towards this target level, it is the responsibility of... More > the finance director or treasurer to raise the external funds required for refinancing and growth. The leverage target should guide the choice between equity, debt and hybrid funding. For the debt capital requirements, management also should decide on the most appropriate debt profile (or debt portfolio).< Less
Categorizing Funding Requirements By Homework Help Classof1
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Each requirement should be funded in different ways. In other words, the nature of the funding requirement dictates the preferred type of funding. For example, core funding needs as a general rule... More > will be satisfied by equity funding and, if available, long-term debt. Short-term cyclical funding and contingency requirements usually are satisfied by shorter-term bank lines.< Less
Advantages of Hybrid Funding By Homework Help Classof1
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The total volume of hybrid funding by companies is small relative to the amount of equity or debt capital. There could be circumstances, however, when companies might benefit from hybrid funding.... More > Convertibles (bonds or preferred stocks) and equity warrant bonds can be issued with a lower coupon rate of interest than similar straight debt. Investors are willing to accept a lower interest yield in return for the prospect of capital gains from converting the bonds into equity.< Less