In a recent post I revealed some of the benefits and disadvantages of debt financing. It is the first part of this article. There are many forms of financing but the two most common ones are debt financing and equity financing. Why do firm have these two main sources of financing in the first place? To truly appreciate and understand their true nature, it is important to recognize and take a look at the accounting equation, which states that “Assets = Liabilities + Owner’s Equity”. This accounting equation will always remain constant because a firm will always look at liabilities as debt and owners’ equity as investors or shareholders money. Owners’ equity provides capital to help run operations, that’s why it is important as well...Read More
Monthly Archives August 2014
Financing has many definitions; however in simpler terminology it is essentially a function responsible for identifying a firm, a corporation best sources of funding. It also takes into account how to best utilize those funds. Now, what exactly do these funds allow a firm to do – many things? Some of the more common activities a corporation will use the funding for is to pay taxes, meet payroll, repay their long-term loans requirements, purchase new equipment’s, training, etc.
There are many forms of financing but the two most common ones are debt financing and equity financing. Why do firm have these two main sources of financing in the first place? Well, before you look further into them, it is important to recognize and take a look at the accounting equation, which states that “Ass...Read More
The secondary mortgage market is comprised of a few powerful federal government agencies. These participants are: Fannie Mae, formerly known as the Federal National Mortgage Association. Freddie Mac, formerly known as The Federal Home Loan Mortgage Corporation, Ginnie Mae, formerly known as the Government National Mortgage Association and the Federal Home Loan Bank (FHLB). The secondary market operates in a manner that is beneficial for primary lenders as well as the housing industry. Plus, they actually control the supply of money in circulation.
Basically, the primary lenders such as: mutual saving banks, big banks, thrifts, provide a mortgage to the consumers who are willing to invest in housing...Read More