• Introduction to Finanacial Management
    . It is related to the financing mix or capital structure or leverage. Here the financial manager has to determine the proportion of debt and equity. It should be optimum finance mix, which maximizes shareholders’ wealth. A proper balance will have to be struck between risk and return. Debt...
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  • Banking
    . Financial management basically includes three types of decision regarding investment, capital structure and dividend. So ultimately financial management has two goals 1) Shareholder wealth maximization 2) Profit maximization for the firm Importance/Function/Role and Responsibility of...
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  • Optimal Capital Structure
    , however; it can increase the shareholdersreturn on their investment and often there are tax advantages associated with borrowing. also called leverage. The uses of the fixed-charges sources of funds, such as debt and preference capital along with the owners’ equity in the capital structure, is...
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  • CF Written Coursework Assignment
    better option since it seeks to find the optimal capital structure that will maximize shareholders wealth without increasing financing risk. Unlike trade-off it predicts the company retains financial slack (cash and liquid securities) within the company that grows in line with profitable investments...
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  • The Cost of Capital
    Stock = ($6.00 / $45.00) + 0.02 = 15.3%. 2. An alternative approach to the dividend valuation model for the cost of capital is the Capital Asset Pricing Model (CAPM). This is the most commonly accepted method for calculating cost of equity. The CAPM specifies the expected return on an asset in...
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  • Finance
    and disbursement of funds Less routine functions:ý ý1.ý sale of stocks and bonds ý2.ý establishment of capital budgeting ý3.ý dividend plans The appropriate risk-return trade-off must be determined to maximize the market value of the firm for ýits shareholders. The risk-return decision will...
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  • Strategies for Iimproving Shareholder Wealthy
    creative accounting practices. | STRATEGIES OF MAXIMIZING SHAREHOLDER WEALTH * Investment in a project with a large net present value. * Sale of a risky division that will now increase the credit rating of the entire company. * Use of a more highly leveraged capital structure that resulted in lower cost of capital. ...
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  • Capital Structure and Agency Theory
    equity, which determines the solvency and refinancing ability of the company to a large extent. While the optimum capital structure is the capital structure that can maximize the wealth of shareholders or bring about the least capital cost. It is necessary to manage the capital structure effectively, for...
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  • Financial Management
    that the firm should make no dividend payment so long as funds can be invested at positive rate of return—such a policy may not always work. Shareholders’ Wealth Maximization 15  Maximizes the net present value of a course of action to shareholders.  Accounts for the timing and risk of...
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  • Finance Course- Capital Structure
    concentration of business risk occurs because debt holders, who receive fixed interest payments, bear none of the business risk. Estimating the Optimal Capital Structure Managers should choose the capital structure that maximizes shareholders’ wealth. The basic approach is to consider a trial...
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  • Sem22
    approach to capital structure. Net operating income approach examines the effects of changes in capital structure in terms of net operating income. In the net income approach discussed above net income available to shareholders is obtained by deducting interest on debentures form net operating income...
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  • Jet2 Task 3
    expansion and to remain financially healthy.  The key is to choose the right mix in order to maximize shareholder return. A1. Capital Structure Capital structure is generally defined as how a company finances its assets. It is measured as a percentage of debt and equity (common and preferred stock...
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  • Fin305
    principals to delegate decision-making authority on behalf of the principals (shareholders). However, there is exists a potential conflict of interest between shareholders and management. Agency theory suggests that, in imperfect labor and capital markets, managers will seek to maximize their own...
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  • Alcar Approach
    finite period Thereafter competitive edge would be lost causing the rate of return to regress to the cost of capital Assessment of the shareholder value impact of the business unit (strategy) Procedure suggested by Alcar approach for assessing shareholder impact of a strategy Step 1: Forecast the...
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  • Bed Bath
    having too much cash such as the risk of not attracting or keeping investors, because of their desire to maximize their returns. When an investor sees too much cash on the balance sheet, they may question the company's ability to manage their capital structure efficiently, and therefore question their...
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  • Financial Analysis
    Task: 3 A. Prepare a summary report in which you do the following: A1. Recommend a capital structure approach that maximizes shareholder return. Capital Structure: “Capital structure is the manner in which a firm’s assets are financed; that is, the right-hand side of the balance sheet...
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  • Finance
    times current paid assets will be used to pay off debt, which lowers the firms assets – leaving less stock for the shareholders. Overall the increased use of debt decreases the required rate of return, because your return on assets/equity is decreasing as your debt increases. Optimal Capital...
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  • American Home Products Case
    % Equity. This ratio will maximize the value for the shareholders as the debt tax shield increase is much more than the negative effect brought by financial distress. 5. AHP should use heavier capital structure which means to use more debt instead of conservative capital structure. But it should...
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  • Marriott Corporation
    it receives 3% of revenues as compensation and 20% of profit over and above a specified return for the owner. If you wanted to maximize growth and shareholder value, this was a more prudent approach to being in the lodging business because the company wouldn’t be held down by large amount of...
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  • Financial Management
    equity shareholders would be higher; due to trading on equity. There is a lower probability that equity shareholders get a stable dividend if, the debt content is high in capital structure as the financial leverage works both ways i.e. it enhances shareholders' returns by a high magnitude or...
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