An Analysis of the Effects of Different Sources of Capital for Astra Holdings
1 INTRODUCTION
1.1 Topic
The theme is about the analysis of the effects of different sources of capital on investment decisions in Astra Holdings Limited. An examination was carried out on specific components of debt, equity and working capital and the reasons for preferring one financing method to the other. Furthermore, the balance sheet movements of compositions of certain elements relating to debt, equity and to a lesser extent working capital were analysed over a period of three years. The main target of this scrutiny was to expose the effects of the sources of finance when utilised on an investment of the organisation’s choice.
1.2 Context
An insight into the three major research issues within the topic area was taken as explained below:
1.2.1 Effects
The topic places a greater emphasis on the aspects emanating from the employment of a specific source of capital. They can be financial or non financial, positive or negative and usually takes the forms of cost, taxation, risk, increased/decreased earnings or even restraints imposed by the fund provider or the regulatory authorities. The research project was designed to collect all the data on effects of all sources of capital being analysed.
1.2.2 Sources of capital
Describes the various options of financing an investment plan available, for instance debt finance can be used instead of equity. The extent to which an organisation uses either debt or equity for investment purposes will be reflected in the firms’ mix of both debt and equity on the balance sheet.
1.2.3 Investment decisions
Thus the application of the capital depending on the goal of the organisation: described by Van Horne (1998) as to maximise shareholders’ wealth in most cases. It took various dimensions in the research such as short term or long term and there were no restrictions on the sizes of investments being studied. However, mostly capital expenditures were analysed.
1.3.0 Reasons for choosing the topic
1.1 Topic
The theme is about the analysis of the effects of different sources of capital on investment decisions in Astra Holdings Limited. An examination was carried out on specific components of debt, equity and working capital and the reasons for preferring one financing method to the other. Furthermore, the balance sheet movements of compositions of certain elements relating to debt, equity and to a lesser extent working capital were analysed over a period of three years. The main target of this scrutiny was to expose the effects of the sources of finance when utilised on an investment of the organisation’s choice.
1.2 Context
An insight into the three major research issues within the topic area was taken as explained below:
1.2.1 Effects
The topic places a greater emphasis on the aspects emanating from the employment of a specific source of capital. They can be financial or non financial, positive or negative and usually takes the forms of cost, taxation, risk, increased/decreased earnings or even restraints imposed by the fund provider or the regulatory authorities. The research project was designed to collect all the data on effects of all sources of capital being analysed.
1.2.2 Sources of capital
Describes the various options of financing an investment plan available, for instance debt finance can be used instead of equity. The extent to which an organisation uses either debt or equity for investment purposes will be reflected in the firms’ mix of both debt and equity on the balance sheet.
1.2.3 Investment decisions
Thus the application of the capital depending on the goal of the organisation: described by Van Horne (1998) as to maximise shareholders’ wealth in most cases. It took various dimensions in the research such as short term or long term and there were no restrictions on the sizes of investments being studied. However, mostly capital expenditures were analysed.
1.3.0 Reasons for choosing the topic