BU127 Chapter Notes - Chapter 10: Canada Pension Plan, Capital Structure, Working Capital
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BU127 Full Course Notes
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Document Summary
Businesses nance the purchases of their assets from two sources: debt: funds supplied by creditors (ex. bank loans, equity: funds provided by owners (shareholders) The mixture of debt and equity a business uses is called its capital structure . Debt is more risky than equity because payments associated with debt are a company"s legal obligation (if a company cannot meet a required debt payment, either principal or interest, creditors may force the company into bankruptcy) Liabilities are probable debts or obligations that result from past transactions, which will be paid with assets or services. Liabilities are recorded at their current cash equivalent, which is the cash amount a creditor would accept to settle the liability immediately. Current liabilities are short-term obligations that will be paid within the current operating cycle (maturity = 1 year or less) Non-current liabilities include all other liabilities (maturity > 1 year)
