Explain relationship between a firm and its maket stages of growth, financial se

Question

Explain relationship between a firm and its maket stages of growth, financial seeking, providers of such external finance at each stage of a market's development, appropriate debt to equity ratio.

A text indicates that small cap growth stocks have performed better over time in terms of total return. However this higher return is related to higher risk because during a market’s high growth phase many firms get shaken out of the market. Once the market matures the situation changes.

Ford secured an $18 billion line of credit prior to the 2008-2009 economic crisis. What advantages did this give them compared to GM and Chrysler during the crisis?

Explanation / Answer

Ford secured an $18 billion line of credit prior to the 2008-2009 economic crisis. Advantages for Ford compared to GM and Chrysler during the crisis is mention below:

1. Ford can use $18 billion of Line of credit in purchase of raw material, but since his competitor has not Line of credit and there is cash crunch due of recession so competitor cannot able to purchase raw materials.

2. Line of credit work as a bank Guarantee, and ford has $18 billion of bank guarantee. So company can use the fund in expansion and manufacturing while the competitor cannot.

3. Line of credit is important in international operation and during recession bank stop issuing line of credit. So during recession the integration operation of competitor affect.

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