| When playing the Business Strategy Game (BSG), | | | | manipulated stock price. This is terribly risky and |
| none of the companies have much money in year 11. | | | | rather unethical, but also innovative and it catches |
| Companies need to raise funds using either debt or | | | | most companies off guard. The concept of people |
| equity. By financing your company via debt, you | | | | buying shares low and selling shares high is worth |
| accept risk of bankruptcy. Bankruptcy occurs if you | | | | noting when raising funds via equity. |
| default upon your loan for 3 consecutive years. | | | | Raising capital through debt is the traditional way of |
| Defaulting upon your loan also causes your credit | | | | raising money which completely exposes your |
| rating and stock price to drop. Equity is the | | | | company to bankruptcy. However, debt financing can |
| alternative to debt in raising capital through the sale | | | | be cheaper than equity financing with an extremely |
| of common shares. The loss of shares decreases | | | | profitable company because money can be repaid at |
| your Return on Equity ratio (ROE) and Earnings Per | | | | a fixed annual rate while buying back shares can |
| Share ratio (EPS). The advantage of selling equity is | | | | become expensive with a rising share price. The |
| that there's no risk of bankruptcy. | | | | great disadvantage that debt has is that it can |
| I have learned an intriguing strategy from 2 | | | | weaken the profit margins annually through interest |
| successful Industry Champions. The strategy is to | | | | expense - a feature that equity does not have. |
| build a financially strong company and sell shares | | | | Both debt and equity have their advantages and |
| when the stock price is high. Then after purposefully | | | | disadvantages when raising capital. Finding the right |
| executing a bad fiscal year, buy back the shares | | | | debt to equity ratio will help your company finance |
| when the stock price has sunk. This allows your | | | | it's growth and profitability to win the Business |
| company to gain huge amounts of capital using a | | | | Strategy Game. |
| "build and sink" strategy for your company on a | | | | |