Final answer:
In developing a financial plan, a corporation needs to determine how much new debt to take on. This decision weighs the benefits of maintaining control against the cost of borrowing and potential profits. It's a critical part of managing the capital structure for sustainable growth.
Step-by-step explanation:
Developing a financial plan for a corporation often involves assessing various sources of finance to determine how much new debt must be obtained. The decision is predicated on balancing the firm's capital structure between equity and debt. Companies may opt for new debt to maintain ownership control, take advantage of tax benefits, or due to market conditions which make borrowing more favorable.
When considering whether to raise financial capital through debt, corporations will assess the purpose and process of borrowing, the impact of issuing bonds, and the implications of corporate stock issuance. Evaluating these options allows a firm to strategize how to finance operations or expansions while also considering how it relates to maintaining or enhancing profits.
In essence, the corporation must understand the cost of borrowing, the market conditions, and the expected rate of return on any investment financed through new debt. This understanding aids in developing a robust financial plan that supports the company's growth objectives and ensures long-term viability.