For debt we call this price the interest rate. for equity, Ask an Expert

Accounting

In a free economy, capital from providers with available funds is allocated through the price system to users that have a demand for funds. The interaction of the providers' supply and the users' demand determines the cost (or price) of money, which is the rate users pay to providers. For debt, we call this price the interest rate. For equity, it is called the cost of equity, and it consists of the dividends and capital gains stockholders expect.

Discuss the FOUR factors affecting the cost of money.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M976768

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