Why do equity investors often use borrowed funds? Explain positive and negative financial leverage and the risks to the borrower of using borrowed funds.

Q: Why do come companies prefer to use discounting in their capital investment decisions?  What is a…

A: Capital Investment:-It is an investment that a company made to purchase its fixed assets or…

Q: Briefly explain the following investment channels with each one’s own returns and Risks. Bank…

A: Return and risk of investments are mostly proportional.

Q: How do financial intermediaries help small investors access the market?

A: Financial Intermediaries: When two parties in a financial transaction engage in business with each…

Q: how do banks improve their net profit margin to increase Return on Equity?

A: Return on Equity (ROE) measures the company’s net income to the value of its total shareholders’…

Q: What are the payout methods? Select all that apply.   Group of answer choices a. Bank loan b. Buyout…

A: Companies often pay out a percentage of their profits to shareholders as dividends, which can take…

Q: Regarding the trade-off theory, capital structure is a trade-off between: O tangible and intangible…

A: The capital structure refers to the mix of various available sources of capital which is used by a…

Q: Discuss the implications of financing through debt as they compare to financing through equity. What…

A: When a company raises capital by selling debt instruments to investors, this is referred to as debt…

Q: Direct financing allows a borrower to:

A: Direct financing is a financing approaches in which the borrower (or financer) directly purchases…

Q: Reacher Technology has consulted with investment bankers and determined the interest rate it would…

A: WACC indicates a company's average after-tax cost of capital from every perspective, comprising…

Q: If investors are less certain about the economic outlook, they will: Select one: O a. raise capital…

A: Following is the correct answer

Q: Corporate bonds

A: Advantages of Corporate Bonds One major draw of corporate bonds is their strong returns, compared to…

Q: Think from the borrower (management) and NOT lender (investor) points of view. Which is the less…

A: Analysis of the given options from the borrower points of view:   a) Bond financing- Bond financing…

Q: Which of the following is a working capital management issue? O A. The choice of which long-term…

A: Working capital is the amount of capital used to run daily operations of the business but the…

Q: Which model is typically used to estimate the cost of using external equity capital? Group of answer…

A: Dividend discount model is a method of calculating the price of stock based on the assumption that…

Q: how do banks improve asset utilisation to increase Return on Equity and what are the risk…

A: Banks are the financial institutions which deposit money from customers at lower interest rates and…

Functions of Financial Institutions

Financial institutions are businesses that are formed to deal with financial and monetary transactions. These organizations primarily accept deposits, advance loans, make investments, and provide foreign exchange services. Financial institutions include, but are not limited to, banks, insurance companies, trust companies, brokerage firms, and investment bankers. Because financial institutions play such an important role in the economy in terms of monetary transactions, regulating their activities has become a requirement for governmental authorities. As a result, the government creates a multitude of laws and regulations to oversee the activities of financial institutions.