Corporate Finance - Reading - Capital Structure and Leverage Do we reallly need to remember this - which country uses long term debt of higher debt levels based on institutional factors (legal system, taxation, information assymetry), banking factors (equity and bond markets, investors etc) and macroeconomic factors (inflation, growth)… I think i might’ve posted this before but I cannot seem to find an intuitive way of remembering all of these…some make sense…others…meh… smarshy …got any ideas!!? since you always have the most interesting analogies! or anyone else please!
i just fix my mind on an emerging market I know…over there long term funds are generally not available so long term debt use is low, maturities are low etc …On the converse strong economies like US have long term funds so they use more debt, the maturities are longer etc. it takes more than 50 % of the way…
I have tried for a few days to keep up with Smarshy with regards to these analogies but for this chapter… have to pass. Sorry.
^^ BUMP smarshy …i know you’re out there…and I know you have a story for these…!
Just put yourself in the shoes of the lender. Would you issue a 30 year bond to a company operating within an emerging market? I sure as heck wouldn’t. How about in a country where inflation is so out of control that the face value I’m expecting to receive in 30 years is virtually worthless because inflation erroded the value away? That is how I would handle that section, read the material and put yourself in the lender’s shoes.
If you are visual, the chart in SS: Use of Debt is INVERSE to a strong factor (lots of lawyers, favorable taxation etc) except for Banking Maturity Length is DIRECTLY related to a strong factor (Longer-Stronger) except for Higher inflation