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debt capacity

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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December 12, 2020 at 2:58 pm #599705
Noah098
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Sir could you explain the following sentence- ” having greater equity would also increase the company’s debt capacity” ? how will company’s debt capacity increase automatically by a sheer increase in equity?
December 12, 2020 at 4:59 pm #599726
John Moffat
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The more equity there is in a company then the more lenders will be prepared to lend.
Think about it – if the share capital is doubled then lenders will be prepared to lend more without incurring extra risk.
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