Kale et al (1991) suggests that the level of risk is one of the main determinants of a firm`s capital structure. By looking at the trade off theory we might expect a negative association when risk and leverage are concerned. If firms have high earnings volatility‚ for some obvious reasons‚ they would not want to indulge in debt financing. It follows that when firms are exposed to bankruptcy and agency costs greater is the incentive to reduce the level of debt otherwise the more volatile a firm`s
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OPTIMAL CAPITAL STRUCTURE INTRODUCTION This report tries to visualize “OPTIMAL CAPITAL STRUCTURE” and represent the facts that include features of capital structure‚ determinants of capital structure‚ and patterns of capital structure‚ types and theories of capital structure‚ theory of optimal capital structure‚ risk associated with capital structure‚ external assessment of capital structure and some assumption related to capital structure. BROAD OBJECTIVE • To determine features of capital structure
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D61/81594/2012 AGENGA BENTER ARWA D61/81595/2012 Section 1 1. Determine the drivers of capital Structure. The primary factors that influence a company’s capital-structure decision are: Company size Big firms are likely to be more leveraged than small firms. This is due to the huge capital assets that they posses Management style Management style ranges from aggressive to conservative. Conservative management is less inclined to use
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CAPITAL STRUCTURE MANAGEMENT IN NEPAL (A CASE STUDY ON NABIL‚ NIBL‚ NEA‚ NTC & HGICL) Table of Contents: Recommendation I Viva- Voce Sheet II Declaration III Acknowledgement IV List of Figures V List of Tables VI Abbreviation VII CHAPTER I. INTRODUCTION Pg No. 1. Background of the study
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Capital Structure and Profit Capital Structure Definition A unite of a company’s long-term debt‚ specific short-term debt‚ common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable‚ whereas equity is classified as common stock‚ preferred stock or retained earnings. Also‚ Short-term debt such as working capital requirements is considered
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Capital Structure Practice Problems 1. Hayfin Enterprises has the following operating results and capital structure: Hayfin Enterprises ($000s) | | | Financial Data | | Revenue | $ 6‚000 | Operating Expenses | $ (4‚500) | EBIT (Operating Profit) | $ 1‚500 | | | Debt | $ 1‚200 | Equity | $ 8‚800 | Total Capital | $ 10‚000 | Interest rate on debt = 9% Share price = $25 (MV = BV) The firm is contemplating
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Capital Structure Decisions: Which Factors are Reliably Important? Murray Z. Frank1 and Vidhan K. Goyal2 First draft: March 14‚ 2003. Current draft: December 20‚ 2003. ABSTRACT This paper examines the relative importance of 38 factors in the leverage decisions of publicly traded U.S. firms from 1950 to 2000. The most reliable factors are median industry leverage (+ effect on leverage)‚ market-to-book ratio (-)‚ collateral (+)‚ bankruptcy risk as measured by Altman’s Z-Score (-)‚ dividend-paying
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Chapter 12 Capital Structure and Leverage LEARNING OBJECTIVES After reading this chapter‚ students should be able to: • Explain why capital structure policy involves a trade-off between risk and return‚ and list the four primary factors that influence capital structure decisions. • Distinguish between a firm’s business risk and its financial risk. • Explain how operating leverage contributes to a firm’s business risk and conduct a breakeven analysis‚ complete with
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Kmart Corporation Calandra Kimbrough BUS 692 Strategies in Human Resource Management Dr. Lao January 21‚ 2013 Kmart is an American chain of discount stores headquartered in the United States. The chain purchased Sears in 2005‚ forming a new corporation under the name Sears Holdings Corporation. Increasing productivity is one of the most critical goals in organizations such as Kmart. In this paper I will be assessing the technology requirements relevant to employee productivity‚ staffing systems
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Rescue Sears Background summary: Sears is one of the largest retail stores in the US and has a wide range of subsidiaries. It established major national brands‚ such as Kenmore‚ Craftsman‚ Lands End‚ and DieHard which are all highly valued. After it merged with Kmart in 2005‚ the company began renovating some Kmart stores and converting them to the Sears format. Its current products are diverse‚ including household hardware‚ home appliances‚ electronics‚ clothing‚ office supplies‚ etc. Sears‚ like
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