Is the financing fee equal to the interest

Financing costs

(Cost of capital) all costs that a company incurs in connection with the financing of a given capital requirement for the capital provision period. A distinction is made between the following cost categories:
(1) According to the frequency of their occurrence: one-time and ongoing financing costs.
One-off costs include the costs associated with raising funds (eg commissions, material costs, security costs, IPO costs, discount, taxes, issuing costs, credit costs) as well as repayment costs (eg repayment premium, cancellation costs, costs of the draw, Exchange rate hedging costs).
The running costs are broken down into the costs of using capital (eg interest, overdraft commissions, dividend payments, taxes, exchange rate hedging costs), debt service costs (eg costs from fiduciary activities, from paying agents and sheet output service or from ongoing repayments) and market maintenance costs (e.g. B. Course maintenance costs).
(2) According to the criterion which factors influence the financing costs, one arrives at a distinction between quantitative and qualitative costs.
In the case of quantitative financing costs, the cost of capital is clearly determined by the price reference base and the price counter. Quantitative costs are the cost of equity for equity and the cost of debt for debt.
The qualitative financing costs result from the quality characteristics of the capital, which result in the maturity of the lease period (liquidity), the security requirements of the investors, their efforts to influence the financing company (striving for independence) and the risk of interest rate changes. There is a positive correlation between the qualitative financing costs on the one hand and / or increasing capital lease time and / or the risk of interest rate changes, while there is an opposite correlation between the qualitative financing costs and the other two features.
(3) According to the criterion of cost behavior: fixed and variable costs. The company management usually strives for? Optimization? the financing costs. The possibilities for this are quite limited in the short to medium term (e.g. substitution of expensive financed capital by cheaper means of the same or inferior quality, possibly in violation of the postulate of matching deadlines). In the long term, optimization is achieved by creating an optimal capital structure and moving fundraising measures over long periods of time to particularly favorable market phases.

Financing costs are all expenses that a company incurs in order to obtain and invest funds for a certain period of time. In detail one counts to the F .:
a) the one-time and ongoing transaction costs (third-party service costs), which include the costs of preparing and concluding the contract for raising funds, the security costs, the costs of the initial and ongoing provision of information to the financier and , if applicable, the costs of repayment;
d) the capital use costs, in particular interest to be paid to the financier for the temporary provision of funds, although interest is to be understood as the effective interest, which in addition to the nominal interest includes all commissions, value costs and the discount ;
c) the costs resulting from the special tax regulations for individual types of financing. It is often controversial whether the distributions to the shareholders (e.g. dividend payments) are to be viewed as financing costs if the aim of the company is to generate an attractive return on its capital contributions for the owners. According to the cost of capital approach, which aims to determine the discount rate to be used to assess the advantageousness of an investment measure, dividend payments are part of the cost of equity and are therefore part of a company's cost of capital. An investment is only beneficial if its return is higher than the cost of capital of the investment.

(Cost of capital) all expenses associated with the procurement of capital (equity, borrowed capital). In the context of economic interest rate theory, financing costs can be justified by the investor's refusal to consume and the higher valuation of present goods compared to future goods (liquidity preference theory, risk premium). When it comes to financing costs, a distinction is made between fixed (one-off) and ongoing (periodic) costs. The former include, in terms of procurement, brokerage and processing fees, information costs, discounts and taxes. One-off financing costs can arise, for example, through repayment premium and exchange rate hedging costs. Current financing costs are in particular dividend payments (for equity investors) and interest (for debt investors), possibly also overdraft commissions and taxes on profits as well as debt service and market maintenance costs. In addition, implicit financing costs can be identified that arise from the fact that a lender demands certain security equivalents (land, buildings, etc.) and these are no longer available as lending values ​​in further loan negotiations.

Previous technical term: financial control | Next technical term: finance loan



Report this article to the editors as incorrect & mark it for editing