Capital referred to the sources of corporate assets (liabilities of the balance sheet) that generate income.These sources are the means of well-being in the real owners of the company and the forthcoming period.Sources of Corporate Finance is one of the main criteria for determining the value of the business.Some of them may affect the net assets of the company active.
cost of capital represents the amount of money that should be given (to pay) to attract a certain amount of the sources of corporate funds.
As we know, there are various companies to raise money.Each of them has its price.
example, the cost of equity capital of the company is the sum of dividends to shareholders (in the case of equity) or from the amount of income paid on shares and the costs associated with them.
company can attract and borrowings.In this case, the price is the sum of interest paid on the loan or bond issue, as well as the costs associated with them.
as a source of financing, the company can use the funds raised.In this case, the cost of capital (accounts payable) is the sum of penalties for accounts payable, are not repaid in a period longer than three months since its inception, and within the period specified in the agreement (contract).
Each company has its own financial structure, consisting of a variety of sources of funds.In assessing the funds raised are used such a thing as the weighted average cost of capital.It brings together the prices of all financial sources.
should be noted that the term "cost of capital" can be interpreted in different ways.When evaluating investment managers are more interested in margin, the marginal price of corporate funds.Due to the fact that the cost of capital is the weighted average cost of various components of the financial structure of the organization, it is often called margin.
If the financial system in the enterprise there are certain types of securities, their price should be calculated separately and weighed against the share that is attributable to these securities in the total amount of corporate funds.
Before determining the average cost of a determination of long-term sources of finance, the formation of prices to attract sources and their market value.
The main long-term funding sources include bonds, loans, preferred and common shares.Price
these sources is based on the dividends paid on the shares, and in accordance with the interest on the loan.Interest is recognized in the statement of financial and economic activity and (unlike dividends) included in the cost.This is called "protivonalogovym effect".With this loan it is usually cheaper than attracting finance by issuing shares.
Price of corporate funds raised by the issue of shares for companies that are included in the official list of stock exchange quotations, will depend on the level of the dividend, the price of placement and release, as well as the market value of the shares.
share of each source of the funds in the total amount of borrowed funds is determined in accordance with the issue price and the issue of shares, but not on their face value.
Thus, the weighted average value of corporate assets affects the share of each source of funding.
