influenced by working capital management and capital structure of firms. The current ratio was taken as representative of the result of working capital management policy and financial leverage as the benchmark for capital structure. Supplementary analysis was also undertaken to assess the impact of operating leverage and firm size on profitability. The purpose of the research was to determine empirically‚ using pooled data analysis‚ whether the linkage of profitability with the selected indicators
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15‚ 61-89. Baker‚ Malcolm‚ and Jeffrey Wurgler‚ 2000‚ The equity share in new issues and aggregate stock returns‚ Journal of Finance 55‚ 2219-2257. Barclay‚ Michael J.‚ Clifford W. Smith‚ Jr.‚ and Ross L. Watts‚ 1995‚ The determinants of corporate leverage and dividend policies‚ Journal of Applied Corporate Finance 7‚ 4-19. Bayless‚ Mark‚ and Susan Chaplinsky‚ 1996‚ Is there a window of opportunity for seasoned equity issuance? Journal of Finance 51‚ 253-278. Brav‚ Alon‚ and Paul A. Gompers‚ 1997‚
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American firms from 1950 to 2003. The most reliable factors for explaining market leverage are: median industry leverage (+ effect on leverage)‚ market-to-book assets ratio (−)‚ tangibility (+)‚ profits (−)‚ log of assets (+)‚ and expected inflation (+). In addition‚ we find that dividend-paying firms tend to have lower leverage. When considering book leverage‚ somewhat similar effects are found. However‚ for book leverage‚ the impact of firm size‚ the market-to-book ratio‚ and the effect of inflation
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structure decision given that certain conditions are met. Because of the unrealistic assumptions in MM irrelevance theory‚ research on capital structure gave birth to other theories. The trade off theory says that a firm’s adjustment toward an optimal leverage is influenced by three factors namely taxes‚ costs of financial distress and agency costs. Baxter (1967) argued that the extensive use of debt increases the chances of bankruptcy because of which creditors demand extra risk premium. He said that
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Cost of Capital at Ameritrade Christoph Schneider Ross School of Business Basic assumptions Tax Rate Beta Debt Leverage (D/V) Leverage (D/E) 1997 35.5% 0.25 0.00 0.00 1996 39.4% 1995 35.1% Average 36.7% Comparable companies’ βE Tax Rate Beta Debt Leverage (D/V) Leverage (D/E) Discount Brokerage Firms Charles Schwab Quick & Reilly Waterhouse Securities 1997 35.5% 1996 39.4% β E from Jan’92-Dec’96 2.30 2.20 β E from all months 2.35 2.30
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focuses on the leverage of power. Instead of working harder‚ we need to learn how to use various forms of leverage. As he puts in‚ “Leverage is the ability to do more and more with less and less.” In discussion of the power of leverage‚ he divided the book into four section which are: The Leverage of Your Mind‚ The Leverage of Your Plan‚ The Leverage of Your Actions and The Leverage of Your First Step. In section one‚ The Leverage of Your Mind. Robert talks about how the leverage of mind can be
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financial statement‚ there are two ways‚ ratio analysis and cash flow analysis. With the financial statement of company Gunting Ltd‚ I will use the ratio analysis to discuess the poor side of Profitability‚ Liquidity‚ Efficiency of the asset useage and Leverage of Gunting Ltd from 2006 to 2008. Profitability ROE is comprehensive indicator of an organisation’s performance since it provides an indication of how well managers are employing the funds invested by the organisation’s sharehoulders to generate
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said about this. To show the relationship between borrowing and market value of equity‚ the authors have used the “leverage ratio”. Leverage can be thought of as the ratio of a corporation’s debt to its long run earning capacity. They have used a firm’s long-plus short term debt as a share of its stock market value to find out the leverage. Then to cumulate individual firm’s leverage ratios into a sector wide average‚ they weighted firms
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Rate and Liability Beta Figure l : Baseline Risk / Return Line vs Leverage 5. Liability Beta Figure 2: Equity vs Liability Beta Figure 3: Equity Beta vs Risk-Adjusted Discount Rate (After-Tax) 6. Underwriting Profit Margin Figure 4: Underwriting Profit Margin vs Loss Payout Figure 5: Underwriting Profit Margin vs Investment Yield Figure 6: Underwriting Profit Margin vs Market Risk Premium Figure 7: Underwriting Profit Margin vs Leverage 7. Conclusion Related Background Reference Reading Appendix - Example
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Franco Modigliani and Merton miller. They made two findings under perfect market conditions. Their first proposition was that the value of a firm is independent of its capital structure and the second proposition stated that the cost of equity for a leverage firm is equal to the cost of equity for an un-leveraged firm with addition of premium for financial risk. They extended their analysis by including the effect of taxes and risky debt. Under a classical tax system‚ the tax deductibility of interest
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