Choose one of the following topics. Describe the concepts in detail and explain relevance to...

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Choose one of the following topics. Describe the concepts in detail and explain relevance to accounting. Include the theoretical and practical applications in your discussion.Cost of Goods Sold and Inventory Valuation ConceptsFixed Assets Depreciation ConceptsDebt FinancingEquity FinancingPaper Should be at least four typewritten pages
	
Document Preview: Intermediate IIWriting AssignmentDue: September 10, 2012Choose one of the following topics.  Describe the concepts in detail and explain relevance to accounting.  Include the theoretical and practical applications in your discussion.Cost of Goods Sold and Inventory Valuation ConceptsFixed Assets Depreciation ConceptsDebt FinancingEquity FinancingPaper Should be at least four typewritten pages.

Robert · Accepted Answer

Debt Financing 
Generally, there are two ways in which a company can finance any new projects or expand its 
existing operations. These are the debt financing and equity financing. The company starts the 
projects with the funds contributed by their friends, family and people close to the company. 
They provide the funds in exchange of ownership in the form of stock. These shares are called as 
common stock and represent the owner’s capital. It is the most commonly used way of raising 
funds for growth and expansion. The corporate expansion or increased research and development 
program can be financed by way of issuance of debt also. The debt can be defined as the funds 
obtained from the external sources like creditors, banks, lenders, issue of bonds, debentures etc. 
which grants loan in lieu of regular interest payments. The bonds are generally source of long 
term financing and it is not required to be repaid earlier.  
The term debt is used in negative sense, but the startup companies use the debt to finance their 
operations. The healthiest corporate balance sheets also include some portion of debt. It is also 
called as leverage. Bank is considered as the most common source of debt. But the debt can also 
be obtained from private company or a family member. The option of debt financing is not open 
for certain companies belonging to certain sectors. For example, startup technology companies as 
they don’t have any assets to offer as collaterals. In case of technology sector, there is no asset 
base that can be securitized as most of the firms operate through rented premises. The only asset 
available with them is hardware. Thus, debt financing as an option is not available to these firms. 
Types of Debt Financing 
The debt financing can also be divided between short term financing and long term financing.  
1. Short Term Financing: Short Term finances are generally obtained to meet the day to day 
operating requirements.

Choose one of the following topics. Describe the concepts in detail and explain relevance to accounting. Include the theoretical and practical applications in your discussion. Cost of Goods Sold and...

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