Bankruptcy: Vodafone and Samsung

Table of Contents Executive Summary 2 Background Information 2 Vodafone 2 Samsung 2 Capital Structure Analysis 2 Vodafone & Samsung Results 3 Liquidity analysis 3 Financial Leverage Ratios 3 Possible changes in Capital Structure – Vodafone 4 Possible changes in Capital Structure – Samsung 4 Capital Structure Finance Theories 4 Modigliani and Miller Irrelevancy Theory 4 Pecking Order Theory 4 Trade-off Theory 4 Clientele Effect 5 Traditional View & Shareholders Wealth 5 Vodafone 5 Samsung 5 Bankruptcy Prediction Models 5 Univariate – Beaver’s Failure Ratios 5 Strengths & Weaknesses 5 Rationale 6 Multivariate – Altman’s Z-Score 6 Strengths & Weaknesses 6 Rationale 6 Multivariate – Ohlson’s Logit Score 6 Strengths & Weaknesses 7 Rationale 7 Vodafone & Samsung Bankruptcy Prediction Analysis 7 Univariate – Beaver’s Failure Ratios 7 Multivariate – Altman’s Z-Score 7 Multivariate – Olhson’s Logit Score 7 Conclusion 7 References 7

Executive Summary
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Background Information
Vodafone
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Samsung
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Capital Structure Analysis
The capital structure of a company is comprised of the different sources of funding used to finance the company’s operations and growth, specifically debt, equity and retained earnings.
The reason for analysing the capital structure of a business is to determine whether or not the proportion of debt to equity will allow a business to create wealth, without endangering the entity. There are many different ratios and techniques that can be used to analyse the capital structure of a business, and whether or not there are signs of financial distress, such as considering the debt-to-equity ratio, the current/quick ratio and gearing ratios.
Further within this report (see Appendix X), we have performed multiple ratios on the financial data for both Vodafone Group Plc. and Samsung, such as: * Current Ratio – We chose to use this ratio as it is a