How does the federal income tax affect US businesses' choice of financing (use of debt vs equity)?
827260
Debt - Interest payments are tax deductable\nEquity - Dividend payments are not tax deductable
210051
FBT, capital gains tax, income tax........
973976
If you are asking about the tax rate it wil be determined by how the specific entity is structred. S-Corps and C-Corps are taxed at the lower personal rate while LLC's are taxed at the higher corporate rate.
1071060
I'm not sure about your question--which is better?\n\nWhen you have a mortgage, early on the bulk of the payments are interest, and you can deduct that amount on  your income tax.  A good deal.
596751
The answer to this question is highly dependent on a number of factors, including the company's industry, competitive position, strategy, operating budget, and the risk tolerances of its owners.  The appropriate debt to equity ratio and dividend payout rate depends will be influenced by:\n1.  Current assets and liabilities will determine the amount a short term debt financing is available from a bank on a revolving line of credit.  Excess availability may be needed to fund short term seasonal needs.\n2.  The amount and type of long-term assets will help determine the amount and type of term debt available.\n3.  The company's fixed charge ratio (commonly, EBITDA divided by the sum of maintenance capital expenditures, taxes, principal and interest on debt) should be maintained at a comfort level (depending on the type of business and industry, at least 1.2 and probably 1.5 - investment grade companies are well over 2.0)\n4.  Cash flow required to fund growth (working capital and growth capital expenditures) will reduce the amount available to pay dividends.  \n5.  Dividends should come out of cash flows needed to maintain and grow the business.
476331
It deals with the capital structure of the company.  As the company has more debt and less equity, it's more highly levered and thus more risky, leading to a higher P/E.  With more stock than equity, there's less risk, which would probably trade at a lower P/E.
623698
a debenture is basically an unsecured bond. If a company raises money through debentures then the liabilities of the company are increased. There is no direct impact to the shareholders if it is a widely held public company. If the company was a partnership though and only two people held the stock, their basis in the company would actually increase by the amount of debt they've taken out. But that's more along the lines of a tax question.
969327
I thought in my Finance class that we were told internal financing (Retained Earnings) is the cheapest form of financing!  You might want to do some more research.
660013
The impact that you see quickly is the initial reaction to the news by traders. Thousands of traders have their fingers poised over the Buy or Sell button, waiting for the news. This reaction is dissipated rather quickly, then the market turns back to the business at hand.\n\nBusinesses can develop more quickly if they borrow money. This is sometimes referred to as "leveraging" your business. \n\nThe interest rate in question is the cost of borrowing money. If interest rates are low, and the cost is cheap, more businesses will borrow. With interest rates rising, fewer will borrow, like now. But everybody doesn't run to the bank the day after interest rates change. Those loans are spread out over weeks and months. \n\nThat is the lag, when the actual effect is felt, when the loans go into effect, or the lack of loans fail to spurt growth.
70608
Otherwise the difference must be financed by issuing debt. Having significant debt will mean that a lot of future revenues will be used to pay interest on the debt. In extreme cases, this can result in financial insolvency - as in the case of the city of San Diego.
156829
It depends on the equity later on down the road. Does the \n\nproperty hold value? Is this the only place you have \n\nlooked? It is your investment which you would need to think \n\nabout- it not just a yes or no answer.
78152
yes, they will take your income tax. You still owe that money, because in a loan you sign a contract and you are responsible to pay it.
791922
Preferred stock will either be quasi-debt (with fixed preferred dividends, but having some equity characteristics) or be quasi-equity (with floating preferred dividends and pronounced equity characteristics like super-voting rights, convertability).  \n\nIf it is the former, use the post-tax dividend yield (rather than pre- with debt because there is no tax shelter).  You can tweak the cost of preferreds up to account for the equity features.  \n\nIf it is the latter, treat it like common and then tweak it downward for the embedded preferrential features (e.g. super voting, convertable calls) and seniority over common. \n\nPreferred par will be noted in the footnotes. You don't need the underwriting costs (and will almost certainly be immaterial to your analysis).
99010
I'm not sure but i think operating and financing are 2 different categories.  the difference i think is that operating are expenses related to assets.
863291
Effect on company:\n\nLower interest costs, shift of financing over to equity from debt\n\nEffect on shareholders:\n\nDilution to old shareholders, possible change in control due to change in percentage ownerships and/or shift in eligibility for directorship\n\nEffect on holders of convertable bonds:\n\nStop receiving coupon payments (if there were any), start receiving dividends (if applicable),now an equity owner, potentially eligible for directorship (if ownership is high enough)
765257
If a business has a large amount of receivables this would show profit on the Income Statement but not affect cash. \nAlso, if the company took on new debt, it hasn't affected cash or profit, but will affect it when it comes due.\n\nIt isn't important that a business have a profit every month. What is important is that the business is growing and has potential to be profitable. If the company is a start-up, it may show a loss. This is far better than company that used to be profitable and has a shrinking profit margin, possibly with a small profit. Especially if the small profit is from capital gains and not operating gains.\n\nI think that one measure of a company's size is ownership. A company could have a relatively large amount of revenues and still be considered small because it is closly held. As far as a revenue amount, I don't know where the line is generally drawn. I think its a relative thing. A business is compared to others within the industry.
493123
I believe federal taxes can be included, but you need to make sure that you file all the returns prior to declaring bankruptcy, otherwise the IRS can convert your bankruptcy from 7 to chapter 13.\n\nFor a more definite answer, I'd go to a lawyer.