2007-01-30 09:59:30 · 6 answers · asked by zionputo 2 in Business & Finance ➔ Corporations
It's called financial leverage. Equity financing is one of the most expensive financing methods. By financing with debt a corporation is able to lower its (weighted) average cost of capital and depending on its required rate of return it can boost earnings and investor wealth.
2007-01-30 10:13:20 · answer #1 · answered by mindblower_2k 2 · 0⤊ 0⤋
All sorts of reasons.
Taking on debt is a healthy strategy to invest in capital (for example new equipment that will allow you to add a new service or product line).
If you don't assume debt you aren't fully realizing the potential of your company. Not having debt is not necessarily a sign of health for a corporation.
2007-01-30 10:03:19 · answer #2 · answered by Bill S 3 · 0⤊ 0⤋
In the simplest terms, a business, or individual for that matter, takes on debt to pay for something they can not otherwise afford (not particularly wise) or to invest in something, manufacturing equipment for example, that will make in return more than the total cost of the debt.
(Taking out debt seldom actually pays for itself (100%) in tax savings.)
2007-01-30 10:19:49 · answer #3 · answered by cranknbank9 4 · 0⤊ 0⤋
Companies have basically two ways to finance themselves: equity and debt. If you offer/sell equity stake to investors, you are giving up part of the ownership, but if you only take a loan out (debt financing) then you only have to repay it with some interest but you will not give up ownership at all.
2007-01-30 10:04:04 · answer #4 · answered by fiberangel 2 · 0⤊ 0⤋
they are looking at 'all' aspects of a take over, buy out, etc.
they are obviously acquiring something beneficial.
2007-01-30 10:08:23 · answer #5 · answered by Anonymous · 0⤊ 0⤋
for the taxes they will save more later
2007-01-30 10:04:59 · answer #6 · answered by peanut 4 · 0⤊ 0⤋