Financial Analysis Of Competition Bikes Inc

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Financial Analysis of Competition Bikes Inc

Financial Analysis of Competition Bikes Inc

Capital Structure of the Company

The Sources of Funding Available To a Business

After analyzing the available financial resources to the company it is evident that it has different options to choose from in order to finance its capital structure. The company has three major sources of equity financing available from where it can finance which are bonds, common stocks and preferred stocks (task 3 capital structures). The company can finance by combining these distinct sources of funds to make an optimal capital structure (Olsen, 1998). The company is financing its capital structure from equity resources. The significant advantage of financing through equity resources is that the company will not be entitled to bear an interest cost. However, it will have to distribute the profits in terms of dividends.

Different Capital Structure Options Available to the Competition Bikes Inc

Primarily Competition Bikes Inc. has three options available through which it can raise and formulate its capital structure.

Bonds - it is a debt instrument, the issuer of the bond bound to pay a certain amount of return (interest) over the period of time.

Common stocks - Common stock is a type of security and a corporate equity ownership in which the return (interest) varies over the period of time.

Preferred stocks - it is also a type of corporate equity ownership in which the return (interest) remains constant over the period of time.

The competition bikes Inc. can raise their capital structure by creating different combinations of these three distinct resources of formulating a capital structure of the company. The table below provides with insight of different combinations of these resources.

All the alternate options discussed above with different combinations of Bonds and stocks (Olsen, 1998). The optimum method of financing is through 20% ...
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