Essay

Chapter 15

dandy social organization Policy

Agenda
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Learning Objectives Principles Used in This Chapter
1.A see at Capital Structure Choices in Practice 2.Capital Structure Theory 3.Why Do Capital Structures Differ Across Industries? 4.Making backing Decisions

Learning Objectives
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3.

Describe a truehearteds smashing structure. Explain why crockeds have different smashing structures and how chief city structure influences a firms weighted mediocre g g cost of capital. Use the basic tools of fiscal analysis to analyze a firms funding decision.

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Principles Used in This Chapter
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Principle 2: There is a Risk-Return Tradeoff.
? Managers are often tempted to take on more debt as it can increase the rate of hold back earned on the stockholders investment in the firm. ? Ho e e this high return comes with a cost. However, highe et n ith cost
? The higher use of debt financial backing makes the firms stock riskier, which increases the required rate of return on stock. ? In addition, it increases the default risk of the firm.

Principles Used in This Chapter
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Principle 3: Cash Flows Are the Source of Value.
? Capital structure choice impacts the cash flows and thus affects the measure of the firm.

15.



1 A Glance at Capital Structure Choices in Practice

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A Glance at Capital Structure Choices in Practice
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The main(a) objective of capital structure management is to maximize the value of the shareholders beauteousness. The resulting financing mix that maximizes shareholder value is called the optimal capital structure.

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Defining the Firms Capital Structure
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A firms capital structure consists of owners equity and its interest bearing debt, including short-term bank loans. The combination of firms capital structure plus the firms non-interest bearing liabilities such as accounts payable is called the firms financial structure.

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Defining the Firms Capital Structure
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A firms financial structure is often described...If you loss to get a full essay, order it on our website: Orderessay



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