Question

Determinants of how long a firm should borrow money include?

Answer 1

Determinants of long a firm should borrow money include are:

⇒the seasonal environment of the business

⇒the cost of inventory

⇒the cash flow forecast

The term "capital structure" describes how a company decides to finance its projects and assets through a combination of internal resources, debt, and equity.

To lower their risk of insolvency, remain effective, and ultimately maintain or become profitable, a company should determine the ideal debt to equity ratio.

The capital structure of a company is influenced by a wide range of variables, including leverage or trading on equity, company growth, the nature and scale of the business, the desire to maintain control, the flexibility of the capital structure, investor requirements, the price to float new securities, the timing of the issue, the corporate tax rate, and the legal requirements.

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