Nobody downloaded yet

Capital Structure - Assignment Example

Comments (0) Cite this document
Summary
This discussion talks that every business starts up its operations with a particular level of funding behind it. In order to perform various operations of business right from the formation stage until the bankruptcy, the company needs finance in order to back its assets…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.2% of users find it useful
Capital Structure
Read TextPreview

Extract of sample "Capital Structure"

Download file to see previous pages In company structure, owners are referred to as the shareholders or stockholders and they are entitled to the amount of dividend recommended by the board of directors of that particular company which is the appropriation of the amount of net profit after interest and tax expenditure.
Debt is another form of financing to the business in which debt holders provide the finance in terms of the loan (Brigham and Ehrhardt, 2008). They want their principal to be repaid to them on the expiry of the term of a loan. They are entitled to the specific amount of interest which the business must pay to them. Interest payments are normally computed as applying a certain interest rate to the amount of loan that they provide. These debt holders are not entitled to any amount of profit (Brigham and Ehrhardt, 2008). In case of bankruptcy, these debt holders are preferred over the owners in terms of receipts obtained after disposal of the assets. In company terms, the amount of loan is termed as debt, and loan providers are called as debt holders.
Capital Structure is the term which is used to refer to the capital mix of financing of the company. In simpler words, capital structure depicts the proportion of equity and debt involved in the financing of the company (Baker and Martin, 2011). It describes whether the company is financed by either equity or debt or a combination of both. However, the example of any company fully financed by debt is subject to extreme rarity. In financial terms, the debt to equity ratio represents the capital structure of the company (Baker and Martin, 2011).
Financial Risk along with Business Risk constitutes the overall risk of the company (Roshan, 2009). Typically, a company is exposed to more financial risk when it starts taking more and more amount of debt in its capital structure.  ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Capital Structure Assignment Example | Topics and Well Written Essays - 1500 words - 1, n.d.)
Capital Structure Assignment Example | Topics and Well Written Essays - 1500 words - 1. Retrieved from https://studentshare.org/management/1765469-financial-management
(Capital Structure Assignment Example | Topics and Well Written Essays - 1500 Words - 1)
Capital Structure Assignment Example | Topics and Well Written Essays - 1500 Words - 1. https://studentshare.org/management/1765469-financial-management.
“Capital Structure Assignment Example | Topics and Well Written Essays - 1500 Words - 1”, n.d. https://studentshare.org/management/1765469-financial-management.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Capital Structure

Capital structure analysis

...?Capital Structure Analysis Table of Contents Problem 28 3 Prob. a) 4 Prob. b) 5 Prob. c) 5 Prob. d) 5 References 7 Bibliography 7 Problem 28 Info Systems Technology (IST) is a manufacturer of microprocessor chips. The company has 100 million shares outstanding and no debt. Now, IST is supposed to raise capital worth $500 million in order to build a fresh production facility. In the occurrence of a financial distress, the company would experience a great loss of both consumers as well as engineering talents. If IST takes a debt of $500 million, the managers of the company are afraid that the present value of the cost of financial distress would be more than the tax benefits by an amount...
3 Pages(750 words)Math Problem

Optimal Capital structure problems

...? Capital Structure Memo Irving Sharp, Chairman and CEO All Seasons Hotel. Dennis Mark, CFO All Seasons Hotel. Date: 3rd December 2013 Subject: Proposed Capital Structure It is important for “All Season” to come up with a specific debt to equity ratio that will optimize the cost of capital of a company. This is the position at which the company’s value will be maximized. The fact that Cost of Capital has been always been shallow, the maximum debt/equity ratio can be defeated without raising the cost of capital. This will create a range in the lower portion of the graph where the cost of capital is similar throughout the range. There is certainty of getting off these ranges. The cost of capital will rise when it is off the range... to the...
3 Pages(750 words)Coursework

Capital Structure

...Running head: CAPITAL STRUCTURE Capital Structure [The of the appears here] [The of the appears here] Introduction This research has been conducted to find out how firms establish their capital structures in the real world in the light of the famous Modigliani and Miller theory. Surveys of the theory of optimal capital structure always start with the Modigliani and Miller (1958) proof that financing doesn't matter in perfect capital markets. The Modigliani-Miller theory may be intuitive, but is it credible Are capital markets really sufficiently perfect After all, the...
11 Pages(2750 words)Assignment

Capital Structure

...What Constitutes Good or Bad Capital Structure ID 19714 Order No. 296025 Name] [Course Name] [Supervisor] [Any other details] 30 April 2009 Table of Contents: Introduction: In this short essay, the author presents some empirical theories on capital budget structure and presents an argument on the factors that could be deciding the structure of capital of a firm. In the end, the author presents some points for discussions. Empirical Theories of Capital Structure The core of Capital Structure theory begins with the theorem of Modigliani and Miller (1958; 268-272) which states that the Cost of capital for a firm (market value of firm) is independent of the capital structure of the firm. They also... recommended that an ideal...
6 Pages(1500 words)Essay

Capital Structure of CVS

...Capital structure of CVS Summarize the company in 3-4 lines CVS has shown a consistent increase in net income from 2004, increasing 19% in 2004and 30% in 2005. There has been a positive change in the working capital of the company in 2005 compared to the figure in 2004. The debt-equity ratio has improved with the company’s long-term debt significantly decreasing from 38% in 2004 to 28% in 2005. CVS has shown an uptrend in all ratios convincing the stakeholders of its flourishing performance. 2. Schedule out & discuss the capital structure & calculate the WACC for CVS. Explain is it good or not and what part brings WACC up &...
2 Pages(500 words)Assignment

The Capital Structure

...The Capital StructureCapital structure refers to the way in which a company is financed by a mix of long term capital such as ordinary share capital, reserves, debentures, etc and short term financing such as bank overdraft. Companies use different financing decisions based upon the investment opportunities and the company’s current capital structure. Each sort of financing has its implications. Debt financing is deemed to be less risky for the debt holder as it includes interest and it can be secured. The cost of debt to a company is therefore relatively less than equity financing. Besides this, debt is considered cheaper by the providers of finance and its attracts tax relief on interest payments. The greater the level of debt... , the...
8 Pages(2000 words)Essay

PepsiCo's Capital Structure Choices

...Pepsi Co’s Capital Structure Choice Submitted by: XXXXX XXXX Number: XXXXXXXX London School of Business & Finance MBA/ MSC Finance Subject Code: XXXXXXX Tutor’s Name: Augustin Entonu Date of Submission: 16th December 2010 Number of Words: XXXX (Excluding Bibliography) Part I: Pepsi Co’s Net Debt Ratio: Executive Summary The main aim of this report is to compute the net debt ratio of Pepsi Co. The report provides a detailed explanation of the various elements like total debt, operating lease commitments, cash and marketable securities and the total value of the company. The Net Debt Ratio of Pepsi co is found to be 30.78 %. 1.0 Net Debt Ratio: Net Debt Ratio of a company indicates the extent to which the company has been financed... three...
14 Pages(3500 words)Essay

Determinants of capital structure

...Determinants of capital structure In order to be able to do the regression analysis, key financial indicators had to be determined. The financial indicators, which have been used for the purpose of conducting the analysis, contributes significantly towards ensuring the financial stability of a company and helps analysts and investors to value a company appropriately. The following table includes the descriptive statistics of different financial parameters. The database that has been used for this empirical analysis and calculation has been retrieved from Data Stream. The database includes statement of financial position, cash flow statement as well as statement of income of many existing and extinct...
20 Pages(5000 words)Essay

Capital structure

...Capital Structure Capital Structure Decision The capital structure of an organization can be described as the mix of debt and equity that a business has and is an important consideration for any business, while evaluating capital structure, assessment of the overall cost of capital is an important consideration. In terms of decision making over capital items, the weighted cost of capital is usually the sum of the cost of equity as well as the total cost of debt and the cost of preferred stocks with respect to their proportions in the business. Factors...
10 Pages(2500 words)Research Paper

Capital Structure

...Capital Structure In the present competitive scenario, companies are required to conduct business operations with incorporating the aspect of better investment management. In this similar context, I identified that the capital requirement of a firm is dependent on two sources that mainly include equity and debt. Respectively, I conjure that varied capital sources are typically based on different costs and thus, needed appropriate analysis for designing an optimal capital structure for raising required finance appropriately (Grundy, n.d.). In businesses, sources of capital comprise equity and debt, which are used...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Capital Structure for FREE!

Contact Us