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  4. What is Long-Term Debt in MikesBikes?
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  4. What is Long-Term Debt in MikesBikes?

What is Long-Term Debt in MikesBikes?

The Long-term Debt decision screen is used to take out loans to raise cash by increasing your long-term debt. Loans are often the easiest ways to get money to fund projects like developing new products or improving marketing plans. However, it is frequently expensive in terms of interest rates and there is an effective limit as to how much debt can be raised due to the burden of high fixed interest charges.

You can make the decision to raise more debt but you need to be aware that the higher your Debt to Equity ratio is, the more risk your company is perceived to have by investors, and the higher the interest on any further borrowing.

How does having Long-term Debt affect my Shareholder Value

One of the ways you can increase your Shareholder Value is to minimize any longterm debt your firm has.

The Debt to Equity ratio is included in the share price calculation. So the higher the Debt to Equity ratio of your firm, the higher the relative risk to investors so the less value your shares have.

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