FORD COMPANY Capital Structure Choices (financing choice):- -What are the differ
ID: 2789822 • Letter: F
Question
FORD COMPANY
Capital Structure Choices (financing choice):-
-What are the different kinds or types of financing that this company has used to raise funds? i.e. How does the firm raise equity (if any)? How does the firm borrow money (if any)?
-Where do they fall in the continuum between debt and equity? Is the firm use more debt or equity in its financing structure? Discuss.
-How large, in qualitative or quantitative terms, are the advantages to this company from using debt?
-How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt?
-From the qualitative trade off, does this firm look like it has too much or too little debt? Discuss.
THANKS TO ALL OF YOU
Explanation / Answer
The following are the different kinds or types of financing used by Ford company for raising funds:
The company has raised a long-term debt of $2.8 billion. The company raises the funds for assisting with new technology. The company raises its maximum debt through 10-year notes and the remaining through 30-year notes.
While considering the financing structure, that is, the proportion of debt and equity of the firm, it is found that the company uses borrows funds more than its own funds. To be more clear, the organization makes use of debt 4 times more than its equity.
By using the debt funds, the company had very good profits for the year 2014 - 2015. However, in the year 2015 - 2016 there was a fall in the profits. The company did not profit.
From the qualitative trade-off, it is found that the company makes use of too much debt. It is desirable for the organization to reduce the amount of debt being used. This will help them to maintain their trade-offs.
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