• Issue Debt or Equity?

Issue Debt or Equity?

Date: 21 November 2018
Puri Denpasar Hotel
Jl. Denpasar Selatan No.1, RT.8/RW.3, Kuningan, Kuningan Tim., Kecamatan Setiabudi, Kota Jakarta Selatan
Jakarta  
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  • Summary

The firm’s financing decisions are one of the three fundamental decisions that are made by the company management. The other two decisions are to decide what long-term investments to undertake and to assess how to best manage the cash flows that arise in the firm’s day-to-day operations.

This firm’s financing decisions are about choosing how the firm should raise the money needed to fund its investments. However, different firms tend to make very different financing decisions. Some firms finance their investments primarily with debt, while others finance their investments primarily with equity. Many are of the opinion that debt is preferred than equity since the cost of debt is cheaper than required rate of return on equity. However when firms borrow money they are obligated by the terms of the loan agreement to repay it, and if they do not meet the terms of the agreement the firm can be forced into bankruptcy.

So what the study of finance could tell us about whether it is better Debt Issuance or Equity Issuance? Or maybe there is no different between debt and equity for the firm?

 

This training will bring the participants to understand, among others:

  • Debt Vs. Equity: The Difference
  • Capital structure theory
  • Capital structure, the cost of equity and the weighted average cost of equity
  • Debt is better and cheaper?
  • The use of debt could increase the Earnings per Share of the firm? But make the cash flows riskier for the project owner?
  • Can the use of debt to turn a Net Present Value of a project from negative to positive?
  • With tax, why debt financing is preferred?
  • Debt over-hang and Debt under-investment
  • How to analyze between two loan facilities with different term and interest rate?