The impact of financing policy on the cost of debt

The cost of debt is a key element to define the amount of the regular interest payments of a company and its business value. It is used for indicators that warn of the economic crisis, which is relevant for the countries where most companies are financially dependent on liabilities. The formalized c...

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Autor principal:	Tetiana Konieva
Formato:	article
Lenguaje:	EN
Publicado:	LLC "CPC "Business Perspectives" 2021
Materias:	aggressive policy conservative food processing industry interest-bearing liability moderate trade payable Finance HG1-9999
Acceso en línea:	https://doaj.org/article/2cbbfd2ae2054293a1474e453900eda6
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spelling	oai:doaj.org-article:2cbbfd2ae2054293a1474e453900eda62021-11-29T07:16:59ZThe impact of financing policy on the cost of debt10.21511/imfi.18(4).2021.161810-49671812-9358https://doaj.org/article/2cbbfd2ae2054293a1474e453900eda62021-11-01T00:00:00Zhttps://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/15811/IMFI_2021_04_Konieva.pdfhttps://doaj.org/toc/1810-4967https://doaj.org/toc/1812-9358The cost of debt is a key element to define the amount of the regular interest payments of a company and its business value. It is used for indicators that warn of the economic crisis, which is relevant for the countries where most companies are financially dependent on liabilities. The formalized criteria for the types of financing policy, improved procedure for the cost of debt calculation make it possible to reveal policy with the capital structure that minimizes the cost of debt.The study is based on Ukrainian food processing companies for the period 2013–2020. The studied database was distributed by the types of financing policies: 22% of the cases have a conservative policy, 15% – moderate, 26% – aggressive, 37% – super-aggressive. The results show that the highest weighted cost of debt (24.1%) belongs to the conservative policy, which replaces negative equity by the expensive long-term debts, as well as super-aggressive policy (20.8%) with trade payable that is near half of the capital, and long days payable outstanding. A company can reduce the cost of debt relying on non-interest-bearing liabilities and trade payable if its days payable outstanding are kept at the industrial level or below. Moderate and conservative financing policies, which are based on equity and avoid debts, provide the lowest weighted cost of debt: 2.1% and 1.2%.Thus, choosing the desired type of financing policy for the company, it is possible to form a capital structure that will reduce the cost of debt.Tetiana KonievaLLC "CPC "Business Perspectives"articleaggressive policyconservativefood processing industryinterest-bearing liabilitymoderatetrade payableFinanceHG1-9999ENInvestment Management & Financial Innovations , Vol 18, Iss 4, Pp 177-189 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	aggressive policy conservative food processing industry interest-bearing liability moderate trade payable Finance HG1-9999
spellingShingle	aggressive policy conservative food processing industry interest-bearing liability moderate trade payable Finance HG1-9999 Tetiana Konieva The impact of financing policy on the cost of debt
description	The cost of debt is a key element to define the amount of the regular interest payments of a company and its business value. It is used for indicators that warn of the economic crisis, which is relevant for the countries where most companies are financially dependent on liabilities. The formalized criteria for the types of financing policy, improved procedure for the cost of debt calculation make it possible to reveal policy with the capital structure that minimizes the cost of debt.The study is based on Ukrainian food processing companies for the period 2013–2020. The studied database was distributed by the types of financing policies: 22% of the cases have a conservative policy, 15% – moderate, 26% – aggressive, 37% – super-aggressive. The results show that the highest weighted cost of debt (24.1%) belongs to the conservative policy, which replaces negative equity by the expensive long-term debts, as well as super-aggressive policy (20.8%) with trade payable that is near half of the capital, and long days payable outstanding. A company can reduce the cost of debt relying on non-interest-bearing liabilities and trade payable if its days payable outstanding are kept at the industrial level or below. Moderate and conservative financing policies, which are based on equity and avoid debts, provide the lowest weighted cost of debt: 2.1% and 1.2%.Thus, choosing the desired type of financing policy for the company, it is possible to form a capital structure that will reduce the cost of debt.
format	article
author	Tetiana Konieva
author_facet	Tetiana Konieva
author_sort	Tetiana Konieva
title	The impact of financing policy on the cost of debt
title_short	The impact of financing policy on the cost of debt
title_full	The impact of financing policy on the cost of debt
title_fullStr	The impact of financing policy on the cost of debt
title_full_unstemmed	The impact of financing policy on the cost of debt
title_sort	impact of financing policy on the cost of debt
publisher	LLC "CPC "Business Perspectives"
publishDate	2021
url	https://doaj.org/article/2cbbfd2ae2054293a1474e453900eda6
work_keys_str_mv	AT tetianakonieva theimpactoffinancingpolicyonthecostofdebt AT tetianakonieva impactoffinancingpolicyonthecostofdebt
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The impact of financing policy on the cost of debt

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