Fundamental elements of business Essay Example | Topics and Well Written Essays - 500 words

Fundamental elements of business - Essay Example Cost of equity does not necessarily involve repayment of funds raised unlike debt. It basically involves rising of funds through interests which not mount pressures on the organization. More pronounced is the fact that cost of equity gives the business organization a sense of expression which allows the organization room to go to all ends to acquire funds. They are not restricted by debt or anything. If a company is successful, the higher the cost of equity which will definitely leave the company little. There is no stipulated cost of equity; it therefore depends on the interest rate which renders the company rather helpless. In this case the cost of equity of a company puts the organization in the position of always requiring votes from shareholders before taking certain decisions "wise use of debt may lower a firms weighted average cost of capital (WACC) during inflation debt is repaid with 'cheap dollars'". In this case raising debt capital is easier and less complicated because the company is not required to comply with state, federal security's laws and regulations. "Interest and principal must always be met when due regardless of a firms financial position, also poor u