Wednesday, December 30th, 2009

How would you decide on the best mix of debt, equity, and preferred stock for your company?

debt for equity
SpizWheel asked:


If you had, or have, your own business, how would, or did, you go about making these decisions?

This entry was posted on Wednesday, December 30th, 2009 at 12:00 am and is filed under Debt Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “How would you decide on the best mix of debt, equity, and preferred stock for your company?”

Bob Says:
December 31st, 2009 at 12:48 am

Debt means that the creditors have a right to a say in the business in order to protect their investment. Recommended allocation: 0%

Preferred stock is like debt except that the dividends aren’t deductable. Recommended allocation: 0%

That leaves equity at 100%

jeff410 Says:
December 31st, 2009 at 11:30 am

The optimum capital structure would be the combination that renders the minimum cost of capital. They higher a company’s tax rate the more debt it should have in the capital structure; the interest on debt being deductible.

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