When debt is utilised to acquire assets, it is important to ensure that the structure of the debt or loan is aligned with the asset’s useful life
Key points
- Farm businesses fund growth, asset acquisition and working capital requirements through either equity contributions or debt funding
- Equity contributions can be considered as cash contributed from an external source representing an increase in equity on the Balance Sheet or profits retained within the business
- Where debt is utilised to fund the acquisition of an asset it is important that the structure of the debt aligns with the asset life cycle and the cashflow of the business
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