Intro to Business › Section P · Financial management and securities markets › Topic P.4
Long-term financing with debt
Factories, aircraft and office towers pay for themselves over decades, so firms finance them with money that does not have to be repaid next month. Long-term debt is one of the two ways to raise that money, and it brings a tax advantage and a fixed obligation in the same package.
In this topic
- Match the money to the asset
- Debt and equity compared
- The tax advantage of interest
- Financial risk and leverage
- Worked example: leverage cuts both ways
- Term loans
- Worked example: an amortising term loan
- Bonds
- Mortgage loans
- Common mistakes to avoid
- Key takeaways
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