Formula for Debt Capital Management (DCM)
According to Kevin Mulleady , in many firms debt capital management is a difficult operational issue. Debt is an unwelcome burden for many firms, yet it is vital for development. Many businesses borrow money to raise their capital, which allows them to leverage that money for growth, profit, and shareholder value. Debt capital, in addition to providing a source of operational cash, may assist businesses in meeting their financial objectives. A well-managed debt capital portfolio enables businesses to fulfill their objectives while increasing the value of their company. However, several aspects must be addressed while deciding whether to use loan financing. The yield to maturity is one element to consider. Short-term rates are greater than long-term yields, but they should not be considered the cost of debt. Inflationary expectations, high interest rates, and negative cash flow estimates may cause investors to reject value-creating ventures. Similarly, high short-term loan rates might d...