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
Answer the following questions. Your answer should be well organized)
- Do financial structure, capital structure and capitalization have the same meaning? if now define each one.
- Compare capital structure with the financial structure.
Financial structure, capital structure and capitalization have the not same meaning.
A capital structure is made up of various long-term funding sources. A financial structure is a collection of many long- and short-term funding sources. The Liabilities portion of the Balance Sheet contains information about the Capital Structure.
Capitalization refers to the total amount of capital raised through shares, debentures, bonds, loans, and retained earnings. The capitalisation of the company is composed of its capital structure. In contrast to long-term loans, capitalization refers to ongoing investment in businesses. Capitalization can be distinguished from capital structure. The word "capital structure" is general and refers to the qualitative side of finance. While capitalization is a specific phrase that only refers to the quantitative component.
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