Navint Executive Insight – Capital Utilization After The Financial Crisis
Since the 2008 financial crisis, there has been an upward trend of corporate borrowings. For the last 7 years, interest rates have been at historic lows and firms have been taking advantage of the inexpensive financings. However, there is a shift in the paradigm which will make it more difficult in general for this trend to continue. Over the last six months, a number of interrelated factors have produced a more complex borrowing and lending marketplace.
It is time for companies to focus on their capital position and sources of new capital. The equity and debt markets are vehicles for corporations to obtain access to capital needed for innovation, value creation and growth. Without the steady increase in retained earnings combined with more costly sources of capital, companies need to better understand the cost of providing this scarce resource to competing CapEx initiatives within the firm.