Discuss readons why companies in the utility industry often have high amounts of debt and companies...

Discuss readons why companies in the utility industry often have high amounts of debt and companies in the sidtware industry often have low debt?

Expert Solution

Companies in software industry will be having a lower debt than the companies in utility industry because companies in utility industry are responsible for a lot of public expenditure and these are the company which will be exposed to electricity, dams,water, natural gas and they will be having a lot of large amount of capital projects so there would be a larger amount of debt involved in These capital projects and they will be having payment of those debt at the longer-term so there would be a higher amount of debt capital in their overall books of accounts.

These utility companies also do not have the privilege of having excessive cash in their books of accounts so they will be generally using the debt financing as their source of capital

Software companies on the other hand will be having lower debt because they are having a higher amount of retained earning in overall books of accounts and they can fund many of their projects by their own excessive reserve so they have the privilege of having the excessive reserves and they only borrow for the shorter period of time because they will be exposing themselves into the projects which does not required capital incentive instruments so they will be mostly dealing with digitalised services and use of cash will be at the higher end.

So it can be summarised that companies in the utility sector will be having higher debt than the companies in the software industries.

jeff jeffy answered 2 years ago

Discuss competitive rivalry in the Airline Industry? Why do many of the companies in the industry...

Discuss competitive rivalry in the Airline Industry? Why do many of the companies in the industry suffer from low performance?

Why do investment-type companies and high-tech companies carry high levels of cash? Is there a cost...

Why do investment-type companies and high-tech companies carry high levels of cash? Is there a cost to holding too much cash? Is it costly to carry too little cash?

Companies often invest in training their employees to raise their productivity. Economists sometimes wonder why companies...

Companies often invest in training their employees to raise their productivity. Economists sometimes wonder why companies spend money on training employees when this incentivizes other companies to poach their employees with higher salaries since the employees gain human capital from training. Imagine it costs a company 25,000 dollars to teach their employees Python, but it also raises their output by 2,500 dollars per month. The company discounts the future at rate of ?=0.01r=0.01 per month. a. For how many full...

According to PG&E Company, the amounts of utility bills for all households in a city have...

According to PG&E Company, the amounts of utility bills for all households in a city have a skewed probability distribution with a mean of $140 and a standard deviation of $30. Find the probability that the mean amount of bills for a randomly selected sample of 75 households will be within $6 of the population mean (hint: find two values of the sample mean) more than the population mean by at least $4 (hint: find the value that the sample...

Companies often find that basic financing (debt and equity) do not provide adequate sources of financing...

Companies often find that basic financing (debt and equity) do not provide adequate sources of financing and desire to access alternative sources of financing or additional pools of investors. In order to attack these investors they will often offer Hybrid financial instruments such as preferred stock, warrants, and convertible debt to potential investors. Please explain the basic characteristics of preferred stock, warrants, and convertible debt, how these can be viewed as providing both a comparable basic investment and an option,...

Why is it so important for companies to have accurate financial forecasts? List and discuss some...

Why is it so important for companies to have accurate financial forecasts? List and discuss some of the impacts inaccurate forecasts have to the company.

Companies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds.

4. Debt (or leverage) management ratiosCompanies have the opportunity to use varying amounts of different sources of financing to acquire their assets, including internal and external sources, and debt (borrowed) and equity funds.1. Which of the following is considered a financially leveraged firm?a. A company that uses debt to finance some of its assetsb. A company that uses only equity to finance its assets2. Which of the following is true about the leveraging effect?a. Interest on debt is a tax...

How do you compare two companies in the same industry but with different Debt/Equity ratios?

1. Explain why we have high levels of personal debt. Who benefits and who loses when...

1. Explain why we have high levels of personal debt. Who benefits and who loses when individuals borrow beyond their ability to pay off the debts? How should this problem be addressed by government and the babking system? 2. What do you think interested you the most in this course? I do think that all students should take an economics course. It is important for you as a business professional, a voter, a taxpayer, a citizen, a student, a borrower,...

Select an industry, identify what might make that industry high-risk, and discuss factors that you would...

Select an industry, identify what might make that industry high-risk, and discuss factors that you would consider when deciding whether to disclose contingencies based on the selected industry.

Question