Cost of Capital, Debt:Equity Balancing, and Max Allowed Debt

Let's say you're in need of $1000 for some requirement, and you need to take a loan for the same. You approach various banks and you boil down to two banks: Bank A is ready to give you a maximum loan of $300 at 3% interest and Bank B is ready to give you a …

Continue reading Cost of Capital, Debt:Equity Balancing, and Max Allowed Debt

Why shouldn’t companies use equity for working capital requirements?

Companies requiring funds can categorize all their requirements essentially into two buckets, debt financing and equity financing. Typically, debt financing involves borrowing funds from a bank or from the general public by issuing bonds. Equity financing includes selling shares of stock or taking on additional owners. The one common mistake entrepreneurs make is thinking that these …

Continue reading Why shouldn’t companies use equity for working capital requirements?