What is debt and why is it important to a company?

What is debt and why is it important to a company?

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Discussion Questions: Debt, Capital, Base Payments

INSTRUCTIONS:

Please show each question with response... 1. What is debt and why is it important to a company? 2. What is capital and why is it important to a company? 3. What are the different theories of equity and how do they compare/contrast? 4. What are Share Base Payments? 5. Give a brief description of SPE`s and describe a current use for an SPE. 6. What is distinction between debt and equity> 7. When is call provisions used and why is it important to a corporation? 8. what is the nature of stock options?

CONTENT:
Discussion QuestionsStudent:Professor:Course title:Date:Discussion QuestionsResponse to question 1 Debt is basically understood as borrowing funds from an external source with the promise of returning the principle amount borrowed, plus an agreed-upon level of interest. Debt is in essence, an amount of money which is owed to an organization or to a person for money borrowed. It can be represented by a mortgage, bond, a loan note or other form stating terms of repayment, and if appropriate, the interest requirements. It is notable that all these dissimilar forms mean intention of paying back the full amount owed by a certain date, which is described in the terms of repayment (Harley, 2013). Debt is important to a company because it will allow the company to make large purchases, for instance to buy expensive equipment, which it could not manage to pay for under normal circumstances. Response to question 2 In business, the term capital can signify several things. Generally, it is understood as the fiscal resources that are available for use. Societies and business organizations that have more capital are considered as being better off compared to those which have less capital. Capital is the sum that is invested into the business so that the business can carry on its operations and activities. It is also the goods and/or money utilized in generating income either by investing in a company, or on a dissimilar income property. It is the net worth of an organization – the amount of money by which the company’s assets surpass its liabilities. Capital is also understood as the property, funds plus other valuables which collectively represent the wealth of a company or a person. Capital is important to a company primarily because it allows a business organization to continue with its activities. Capital allows a business to expand and improve its operations and activities. Response to question 3 There is only one theory of equity: the Stacey Adams equity theory – this helps in explaining why conditions and salaries/wages alone do not determine employee motivation. This theory also explains the reason as to why giving one employee a pay-increment or promotion can actually have demotivating effect on the other workers. In essence, whenever employees feel advantageously or fairly treated, then they are more probable to be motivated. Conversely, whenever they feel unfairly t...
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