Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Explain the difference between financial capital and physical capital
Every type of business id defined by its assets. These assets can be classified as financial capital and physical capital.
Let's, start with financial capital. Financial capital can be termed as legal ownership of assets that can measured in terms of money and can be easily liquidated at the time of need of the business. It is the assets that are needed by the company to buy goods or services for the business which can be measured in terms of money.
Financial capital can be in form of debt, equity and trading capital.
It also maintains future cash flows for the business in terms of interest on loan and capital appreciation.
Step by step
Solved in 2 steps
