Effects of Using Borrowed Capital within the Companies’ Activities

Bogdan-Florin Filip ()
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Bogdan-Florin Filip: Alexandru Ioan Cuza University of Iasi

EuroEconomica, 2012, issue 1(31), 67-74

Abstract: The paper approaches some aspects regarding the use of the borrowed capital by the companies, in the light of the effects generated by it in relation to their own activity. The treatment of these effects starts from the premise that, beside the effect of increasing the total capital of which the company can dispose by obtaining loans, there are complementary effects such as increasing of costs, financial leverage and financial risk, which are analyzed in terms of the specific implications on the company’s activity. There are taken into consideration some particularities and their implications which come from the formation of the borrowed capital for the company, determined, in principal, by the use of the bank loans, respectively the use of the bond loans, inclusively in relation with the use of equity.

Keywords: loans; equity; capital cost; financial leverage; financial risk (search for similar items in EconPapers)
Date: 2012
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