ACC 210 Lecture 9: Chapter 9 notes

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Chapter 9 notes
Capital Structure
o This term represents the specific mixture of liabilities and
stockholders equity a business has chosen to raise capital to
support business operations and expansion/growth
Debt financing
borrowing money from banks and/or bond investors
Equity financing
Obtaining additional investment from stockholders
Companies have three primary sources of long-term debt financing
o Bonds, notes and leases
o Bonds are the most common form of corporate debt
Bonds
o Formal debt security
o Usually issued to many lenders (unlike a loan received from an
individual bank)
o Borrower repays the principal (known as face value) on a
specified maturity date typically 10 to 20 years later
o Pay interest over the life of the bond typically interest
payments are made every 6 months (semi-annually)
o Bonds usually are issued to many lenders
while notes most often are issued to a single lender such
as a bank.
For most large corporations, bonds are sold, or underwritten, by
investment hourses
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