Financing Decisions

The funding choices of a company have important implications for both the risk and valuation of the company and the securities held by the corporate stakeholders. The analysis can be examined through the decomposition of the return on equity (ROE) and through the capital structure theories.

• Discuss the implications of a firm using debt versus equity for funding purposes. Include the important risk and valuation implications.
• Illustrate the concept using the example of your study company.
• Discuss whether you believe raising long-term funds from a stockholder or short-term funds from a banker (that is, equity or debt) would tend to make people and planet initiatives easier or harder to initiate? Explain.

Write your responses in three to four paragraphs.