BU127 Chapter Notes - Chapter 10: Current Liability, Capital Structure, Capital Account

• School: WLU
• Department: Business
• Course: BU127
• Professor: All

Document Summary

Businesses finance acquisition of assets from: debt funds supplied from creditors, equity funds provided by owners. Mix of debt and equity for a company is called capital structure. Mgt can also select from variety of sources from which they can borrow money, that is not capital structure. Managers consider risk and cost when borrowing money: debt capital (cid:373)o(cid:396)e (cid:396)isk(cid:455) (cid:271)e(cid:272)ause p(cid:373)ts(cid:894)i(cid:374)te(cid:396)est(cid:895) a(cid:396)e a (cid:272)o(cid:373)pa(cid:374)(cid:455)"s legal o(cid:271)ligation. Do(cid:374)"t (cid:373)eet (cid:396)e(cid:395)ui(cid:396)ed de(cid:271)t p(cid:373)t (cid:894)p(cid:396)i(cid:374)(cid:272)iple o(cid:396) i(cid:374)te(cid:396)est(cid:895) : (cid:272)(cid:396)edito(cid:396)s (cid:373)a(cid:455) fo(cid:396)(cid:272)e (cid:272)o(cid:373)pa(cid:374)(cid:455) i(cid:374)to (cid:271)a(cid:374)k(cid:396)upt(cid:272)(cid:455) require sale of assets to satisfy debt. Liabilities: debts or obligations airing from past transactions that will be paid w assets/services: recorded at current cash equivalent cash amount a creditor would accept to settle liability immediately. I(cid:374)di(cid:272)ato(cid:396) of (cid:272)o(cid:373)pa(cid:374)(cid:455)"s a(cid:271)ilit(cid:455) to (cid:373)eet short-term obligations. Analysts use as indicatory of amount of quick assets available to satisfy current liabilities. Could be misleading measure of liquidity can influence by small variations of transactions.