Why it is important to monitor client’s debt to equity ratio

Assignment Help Financial Management

Reference no: EM131606518

The cost of debt capital is an important ratio to discuss and help clients understand because if their profit margins are good and if a company’s overall debt is not too high then companies can use it to their advantage. In my experience, helping clients understand this concept is important because it teaches clients that they can increase sales and revenue by incurring smart debt. For example, if a client’s cost of debt capital is 6%, but their profit margin is 12%, then clients can earn an extra 6% in profits by incurring more debt. It is important for clients not to incur too much debt, so their debt to equity ratio must be taken into consideration.

Tell me why it is important to monitor a client’s debt to equity ratio? What happens when there is too much debt?

Reference no: EM131606518

Questions Cloud

Calculate their medical loss ratio : Look up the annual report and income statement of a publicly-traded health insurance company. Calculate their Medical Loss Ratio

Best data type to use to store the given data in oracle : Identify the best data type to use to store the following data in Oracle, in SQL Server, and in Access.

Develop the elements of an effective learning plan : Throughout this course, you've examined how to develop the elements of an effective Learning Plan.

What types of communication were used during the incident : What types of communication/procedures were used during this incident? Provide examples on the information that was disseminated .

Why it is important to monitor client’s debt to equity ratio : Tell me why it is important to monitor a client’s debt to equity ratio? What happens when there is too much debt?

Bullying in the workplace : When does "bugging" someone become bullying? Or is there a boundary and what can HR do about any of this/? Discipline people, terminate them?

Compute the allocation of service department costs : Caro Manufacturing has two production departments, Machining and Assembly, Compute the allocation of service department costs to producing departments

Identify current and emerging issues requiring advocacy : Engage in advocacy for health and health education/promotion.Identify current and emerging issues requiring advocacy.

Difference between the char and varchar data type : Write a paragraph that explains the difference between the CHAR data type and the VARCHAR data type. Use your Web browser and your favorite search engine.

User Account

All Pages