MGM625-0903A-01 Applied Finance for Decision-Making - Phase 3 Essay - 1

MGM625-0903A-01 Applied Finance for Decision-Making - Phase 3 Discussion Board 2 - Essay Example It has been noted that in most cases the debt carries costs which are much lower (Morgan, Redman Smith and Cooper, 2001). The main reasons behind this include, the ownership of the equity holders is not diluted, and higher rates of interest needed due to the higher levels of risk taken, and also the interest paid on the debts do qualify as business expenses. In theory it is good to use debt as a financing source for businesses. This is mainly because of the fact that the interest paid is generally tax deductible and it can be included as business expenses unlike the cost of equity. This ratio reveals the solvency and the capital structure of the company. It is used as an indicator for the leveraging in terms of the debt and also provides for a better understanding of the amount owned and the amount owed. This gives a view of the amount the company can use for borrowing. There are also a few benefits of debt which include the tax benefits, and also inclusion of higher levels of discipline to the management. However, considering the cost of debt, it is seen that it includes, loss of future flexibility cost, agency cost and bankruptcy costs that can be levied on the companies (Samuels, Wilkes and Brayshaw, 2000). The normal reaction would involve an increase in the Long term debts, which would also lead to an increase in the cash on the assets side of the book. This would in turn have a strong affect on the above mentioned ratios. Also the changes might not be appreciated by the creditors. Also the company might also face issues in terms of receiving loans from the banks as well. Use of higher levels of debt financing when compared to the equity financing means the company would have higher financial leverage. It is noted that the interest payments to debtors is normally tax deductible unlike the dividend which is payable to the shareholders. Thus if the company has higher levels of debt

Case study- Coursework Example | Topics and Well Written Essays - 750 words

Case study- - Coursework Example This will result in many followers and will raise the popularity of cloud computing. a) For a new entrant it is hard to invest huge amount in infrastructure to build own data centre. Here cloud computing lessens their cost to substantial level (Pay-Per-Use facility might be recalled of as an example). Capacity Planning: - This is a course of action that an organization use to determine the production required to meet varying demands for its products. Here though Amazon is a retail organization, they shift their business from retail to cloud computing technology, since lots of small organization who are dealing with large data sets are opting to be their clients. In the long run to reduce the risk of server downtime they are simultaneously useing public and private cloud. Scalability: This is the capacity of a system to accomplish large number of works in a competent style with ultimate achievement of growth. Amazon is handling a large number of data of many organizations with flexible computing power, messaging and other services. Circumscribing this dimension, Amazon is equipped with huge resources directed towards helping an array of small firms entering new business and struggling to maintain huge database. On the other way, subscribers of Amazon for example, Zynga is using a business model where they use private and public cloud jointly. At the juncture when Zynga decides to launch any new application they use public cloud because they are uncertain about their future applicability. Once this application stabilizes in the market they shift to its own cloud computing dynamics for the reduction of risk related to the server downtime problems. TCO: Total cost of ownership is an estimation of cost method and is used to assist consumers and project managers to establish direct and indirect costs of a product or