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Hi,
I have a quick question on the example 2 from Chapter 11 lectures in relating to financial liabilities. What confuses me is that at 13:23 we can see B/F+ Financial Cost – Coupon =C/F. I am not quite sure why the financial cost needs to be added onto the money that we received from issuing shares. Who is liable to the financial costs here? Thanks.
Hi,
As we have issued debt then interest will accrue on the outstanding amounts, hence the finance cost is added to the opening balance. We are liable for these costs and we then make the payment towards them based on the coupon rate that reduces the outstanding liability.
Thanks
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