Chapter 13
Planning Equity
Financing
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Business is organized to achieve
certain objectives
Business Strategy
Companies acquire funds from
three sources
Two financing categories
• .
What is the Risk of Debt
Financing?
13-6
Debt-to-Equity Ratio
Times Interest Earned Ratio-earnings
before interest and taxes divided by interest expense
What is the Reward of Debt
Financing?
13-9
Return on Owner’s Equity Ratio
Reward of Equity Financing
Risk of Equity Financing
• .
Equity Financing
.
What are the Advantages of Sole
Proprietorships and Partnerships?
13-14
What are the Disadvantages of Sole
Proprietorships and Partnerships?
13-15
What are the Advantages and
Disadvantages of Corporations?
Advantages
13-16
Disadvantages
Pro forma Statement of Owners”
(Partners) equity
How do Partnerships Determine how Profits
/Losses will be Allocated to the Partners?
13-18
Exercises
Exercises
What are the Types of Stock
Issued by Corporations?
13-21
What are the Most Common
Preferences given to Preferred Stock?
13-22
What are the Different “Numbers of
Shares” Concerning Stock?
13-23
What is Treasury Stock?
13-24
What are the “Values” Associated
with Stock?
13-25
What Types of Dividends are
Distributed?
13-26
What are the 3 Dates Associated with
Dividends?
13-27
What is the Difference Between a
Stock Dividend and a Stock Split?
13-28
Exercise 13-10
Exercise 13-13
Exercise 13-14