Capital structure, discussion help
Need response to students disc post 1. Businesses only become eligible for a line of credit in the eyes of banks
when they prove to have a stable cash flow. While short term line of credits
requires no collateral and are instantly available, they are insufficient for a
long term need. A long term need such as acquiring a land may take as long as 20
years with short term financing during the course of which economic, social and
environmental changes are inevitable and may cause the business to face debt
issues. Business may have to face high cost of capital and changes in interest
rates and inflation which increases the risk of payback efficiency.2. The three major concepts that I have learned in this course and will utilized
in the future are capital structure, what is an efficient financial market, and
the importance of financial management in a business. Being that I have a
concentration in finance, I am not new to any of those subjects but I really do
not think you can get to much of it especially if you trying to operate in that
Capital structure refers to the percentage of money at work in a
business. The planning of capital structure is important to survive
the business in the long run. Proper planning will be helpful to enlarge areas
of getting money; this works well when you are trying to start a new business
from the ground up.
An efficient financial market is efficient if current asset prices
fully reflect all currently available relevant information. An efficient market
gives a business the freedom to enter and exit which is good for new businesses
that are not familiar with all the tools to stay in the industry.
Financial management is one of the most important operation of the
business because financial management responsibilities affect all aspects of a
business. One must not just be concern with profit (sales) but also with
preparing for expenses and losses. 3.How would you finance your short term needs if you were funding your
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