Reading the business strategy of the game (BSG), none of the companies have a lot of money in 11th Companies need to raise funds, either debt or equity. By financing your business through the debt, you accept the risk of bankruptcy. The error occurs when you default on your loan for three consecutive years. Defaulting on your credit caused to fall and your credit rating and stock price. Equity is the alternative to debt capital through the sale of shares to increase. The percentage loss reduces your return on equity (ROE) and earnings per share ratio (EPS). The advantage of the sale of the shares is that there is no risk of bankruptcy.
I learned an interesting strategy of two industry champions for success. The strategy is to build a financially sound company and sell shares if the stock price is high. Then buy back, after running a poor business plan, the shares if the stock price sank. This allows your company to build huge amounts of capital with an “and sink” strategy of your company is manipulated on a price increase. It is extremely risky and not unethical, but also innovative and it catches most companies unprepared. The concept of people who observe low and high sales to buy shares is when the collection of funds through equity.
Raise capital through debt is the traditional way of raising funds, making your full company into bankruptcy. However, the debt will be cheaper than equity financing at a very profitable business because the money can be repaid at a fixed rate each repurchase of shares, may be a price per share to raise expensive. The major disadvantage of this debt is that they weaken the profit margins every year by the interest expense – a feature that fairness is not.
Debt and equity have their advantages and disadvantages in raising capital. Find the right debt-equity ratio enables your company to fund growth and profitability in the business-strategy game is to win.
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bsg return on equity, bsg tips