The impact of financing policy on the cost of debt

Abstract

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.

Financial and investment indicators for accelerating innovation development: Comparison of GII leaders and Ukraine

“…The growing imbalance in the financial sector, the increase in leverage, the equity capital of business entities against the background of the expansion of speculative operations and the decrease in the share of productive investments requires its timely neutralization in order to transform free cash into productive investments, including investment in innovation development (Vasilyeva et al, 2013;Vasylyeva et al, 2014). Konieva (2021) formalized criteria for financing policy types, moderate and conservative financing policy, and concluded that choosing the desired type of financing policy allows creating an optimal capital structure for innovation development.…”

Development of financial performance of food retailers as an attribute behind the increase of food insecurity in selected Central and Eastern European Countries

“…Their market position among EU Member States is narrowly associated with the development in the growth of market concentration in the retail food market, which also affects further changes in the market structures. Changes in the market structures are necessarily reflected in the economic situation of respective entities through the food value chain involved stakeholders, and it inevitably affects the final consumers of food (Beacom et al, 2021;Horvathova et al, 2022;Konieva, 2021).…”