Discussion $-$ Equity vs$.$ Debt Financing

Using General motors and Ford for analysis

A company needing additional resources to finance operations can either borrow it or convince stockholders to invest more. $($There is also the third option of using money already accumulated, but this possibility sort of voids the premise of "a company needing additional capital".$)$

In your response this week note the debt$-$to$-$equity ratios of both your companies that you will be performing financial statement analysis on for the course project. The debt$-$to$-$equity $($D$/$E$)$ ratio is used to evaluate a company's financial leverage and is calculated by dividing a company's total liabilities by its total shareholder equity. Post your Excel worksheet to share the details of your calculations.

After posting the debt to equity ratios of both companies, respond to at least one of the following questions regarding equity vs$.$ debt financing. Your response may address more than one of these at the same time.

a$.$ List the various advantages and disadvantages of issuing stock or long$-$term debt, such as bonds.

b$.$ If you were helping manage a company that was in the market for more capital, which of these two basic options would you recommend?

c$.$ What argument for one option versus the other would you present to your fellow board members?

d$.$ If your choice was to issue preferred stock, and you anticipated a low demand for this type of security, what enhancements $($features$)$ would you include to make your company's preferred stock a more favorable investment?

e$.$ If your choice was to issue long$-$term debt $($bonds$),$ and you anticipated a low demand for this type of security, what enhancements $($features$)$ would you include to make your company's bonds a more favorable investment?