Debt capital

Debt capital

Debt capital is the capital that a business raises by taking out a loan. It is a loan made to a company that is normally repaid at some future date. Debt capital differs[1] from equity or share capital because subscribers to debt capital do not become part owners of the business, but are merely creditors, and the suppliers of debt capital usually receive a contractually fixed annual percentage return on their loan, and this is known as the coupon rate.

Debt capital ranks higher than equity capital for the repayment of annual returns. This means that legally, the interest on debt capital must be repaid in full before any dividends are paid to any suppliers of equity.

A company that is highly geared has a high debt-to-equity capital ratio.

References

  1. ^ Elite Mergers & Acquisitions: M&A Advisor: Financing Options For Mid Market Companies
  • Corporate Finance: Theory and Practice, by Steve Lumby and Chris Jones, Thompson, London.

Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • debt capital — see capital Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • debt capital — money from external sources used to finance a business. See also equity capital. Glossary of Business Terms * * * debt capital debt capital ➔ capital * * * debt capital UK US noun [U] ► ACCOUNTING, FINANCE money that a company borrows from banks …   Financial and business terms

  • debt/capital ratio — UK US (also debt to capital ratio) noun [C] (ABBREVIATION D/C ratio) ► FINANCE a company s debt as a percentage of its capital as a whole, used to calculate if it has borrowed too much, if it can borrow more, etc.: »The company has a financial… …   Financial and business terms

  • debt capital — foreign capital, funds that a business borrows from foreign sources …   English contemporary dictionary

  • debt capital — See: loan capital …   Accounting dictionary

  • capital — cap·i·tal 1 adj [Latin capitalis, from caput head, a person s life (as forfeit)] 1 a: punishable by death capital murder b: involving execution a capital case 2 [Medieval Latin capitalis chief, principal, from Latin …   Law dictionary

  • Capital Subscription Fund — Capital Subscription FundA Capital Subscription Fund is method of funding used for listed companies whereby a facility is provided in exchange for ordinary stock in the company, typically at an agreed discount to the market price. The facility… …   Wikipedia

  • capital — the total owned and borrowed funds in a business. Glossary of Business Terms (1) Usually refers to the total of the equity accounts in a firm. For a bank, the equity accounts are common and preferred stock, surplus, and undivided profits. For… …   Financial and business terms

  • Capital — Money invested in a firm. The New York Times Financial Glossary * * * capital cap‧i‧tal [ˈkæptl] noun [uncountable] 1. ECONOMICS money or property used to produce wealth: • Countries around the world are hungry for capital and economic… …   Financial and business terms

  • Capital Gearing — The degree to which a company acquires assets or to which it funds its ongoing operations with long or short term debt. Capital gearing will differ between companies and industries, and will often change over time. Capital gearing is also known… …   Investment dictionary

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”