Recommendation on Corporation Financing - Essay Example

The client started a business that offers technology to the medical profession to facilitate compliance with health insurance Portability and accountability. In that regard, the client seeks the best financing means that can enable the expansion of the business.
Issues
The best financing approach is dependent on one which offers the best tax advantage. To get the best approach, a comparison must be made between equity formation and debt
Analysis
With regard to the tax advantage between debt financing and equity capital formation, it is important to note that any interest that accrues as a result of debt financing is tax deductible while cash flows that result from equity are not. This means that as the rate of marginal tax increases, the higher the amount of debt that the corporation would have to pay. However, on the flip side, there is an advantage that de loan payment is tax deductible and that means that the corporation ends up savings on its tax burden as the progressing payment are made. Read More