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Equity vs Debt

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Discuss how stakeholder objectives might impact on shareholder value

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The directors of a property company are looking at whether they shouldconstruct a new office building. The economy is doing well, and the amount ofvacant office space is reducing sharply. As part of their decision they decide to use the 6 Thinking Hats te

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ENTI 317 Mind Map

Ved Nicole Van Huigenbos

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Amount refers to the monetary value of a transaction or the total amount of money paid or received in a commercial or financial transaction.

Importance: Amount is important because it allows businesses and individuals to know the exact monetary value of a transaction and to determine whether or not it is viable. Amount is also used to keep track of income and expenses, to calculate income tax, and to make informed financial decisions. In business transactions, the amount is crucial in determining the selling price, cost of production, profit margin and other important aspects of business management.

Characteristics: Amount refers to the monetary value of a transaction. The amount can be positive or negative, depending on whether it is a sum received or paid. The amount may include taxes, commissions or other additional charges. The amount is expressed in a specific currency.

Capital: Capital refers to the amount of money used to start a business, make an investment or repay a loan. Capital can be in the form of cash, financial assets, real estate or other assets.

Importancia: El capital es importante porque permite a los dueños de negocios y a los inversores financiar sus proyectos. El capital adecuado puede permitir un crecimiento más rápido y una mayor rentabilidad.

Characteristics: Capital is essential to start a business or make an investment. Capital can be in the form of cash, financial assets, real estate or other assets. Capital can be equity (from the owner) or debt (from loans). Capital is a limited resource and must be used effectively to achieve the objectives of the business or investment.

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Compound Interest: Compound interest refers to the amount of money paid or charged for the use of borrowed money, but in this case, the interest is calculated not only on the original principal, but also on the interest earned in previous periods. In other words, the interest is added to the original principal, which means that the interest compounds over time. Compound interest is used in long-term loans, investments and savings.

Importance: Compound interest is important because it allows lenders to receive higher compensation for lending their money over a longer period of time. In addition, compound interest can generate higher returns on long-term investments and savings.

Characteristics: Interest is calculated on the original principal and interest earned in prior periods. Interest increases over time due to compounding. Compound interest is more complex to calculate than simple interest. It is commonly used in long-term loans, investments and savings.

Simple Interest: Simple interest refers to the amount of money charged or paid for the use of borrowed money. It is calculated on the original principal and does not take into account interest earned in previous periods. In other words, interest is paid only on the initial principal. Simple interest is used in short-term loans and is easy to calculate.

Importance: Simple interest is important because it allows lenders to receive compensation for lending their money. In addition, simple interest is easy to understand and calculate, making it an attractive option for lenders and borrowers.

Characteristics: Interest is calculated only on the original principal. Interest remains constant over the term of the loan. Simple interest is easy to calculate. It is commonly used in short-term loans.