Financial Leverage: Financial leverage is a leverage created with the help of debt component in the capital structure of a company. Higher the debt‚ higher would be the financial leverage because with higher debt comes the higher amount of interest that needs to be paid. Leverage can be both good and bad for a business depending on the situation. If a firm is able to generate a higher return on investment (ROI) than the interest rate it is paying‚ leverage will have its positive effect shareholder’s
Premium Finance Debt Corporate finance
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
Premium Finance
Operating leverage Def. of leverage - The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad‚ however; it can increase the shareholders’ return on investment and often there are tax advantages associated with borrowing. Def of operating leverage- a measurement of the degree to
Premium Operating leverage Leverage Revenue
Caleb Johnson Capital Structure Theory Working Capital Management Dr. Woodward 10/14/14 Capital Structure Theory Part a. (Capital Structure) Capital structure is very important. Not only does it influence the return a company earns for its shareholders but can also be a determining factor on whether or not a firm survives a recession. A company’s capital structure is a mix of their short-term debt‚ long-term debt‚ and equity. A firm’s capital structure is the way the firm finances all of its
Premium Finance Weighted average cost of capital Corporate finance
American Finance Association Market Timing and Capital Structure Author(s): Malcolm Baker and Jeffrey Wurgler Source: The Journal of Finance‚ Vol. 57‚ No. 1 (Feb.‚ 2002)‚ pp. 1-32 Published by: Wiley for the American Finance Association Stable URL: http://www.jstor.org/stable/2697832 . Accessed: 08/09/2013 22:22 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use‚ available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a
Premium Finance Corporate finance Generally Accepted Accounting Principles
Birmingham Business School BSc Accounting and Finance Capital structure and shareholder return in Chinese banking industry Your Name Your Registration Number (07 14856) Extended Essay 2011-2012 Supervisor’s Name The length of the main body of the essay: 5‚770 words Index Abstract In June 2004‚ Basel II was published and it required banks to set up risk and capital management requirements so as to ensure adequate capital for the risks‚ to which the banks are exposed through
Premium Bank Banking
#2 Capital Structure -1 Dr. Kulbir Singh Advanced Corporate Finance (ACF) Term III 2013-14 IMT-Nagpur Capital Structure: Introduction Mix of debt and equity use to finance its business Goal of CS Decision: to determine the financial leverage or CS that maximizes the value of company by minimizing WACC. Theory of Corporate Financing MM Theory of CS Irrelevance Trade-Off Theory Agency Theory Dr. Kulbir Singh (IMT-Nagpur) ADF 2013-14 Pecking Order Theory 2 Capital Structure: Introduction……
Premium Weighted average cost of capital Corporate finance
Nike‚ Inc.: Cost of Capital Case 14 A Case Brief Submitted to Submitted by In Partial Fulfillment of the Requirements for Date Submitted September 28‚ 2011 Summary This case highlights Kimi Ford‚ a portfolio manager with NorthPoint Group‚ a mutual-fund management firm. She managed the NorthPoint Large-Cap Fund‚ and in July of 2001‚ was looking at the possibility of taking a position in Nike for her fund. Nike stock had declined significantly over the previous year‚ and it appeared
Premium Interest Arithmetic mean Finance
INTRODUCTION 1.1 Background The main theme of capital structure is the reasoning that it is the blend of two main financial variables which are liabilities that includes debt and the second one is also a kind of liability retained earnings or equity. These are the main variables that are involved in the asset financing of an organization. The major decision that is made in finance is about the capital structure. There are many theories about capital structure. Except of those theories there is the major
Premium Finance Corporate finance Debt
Leverage Analysis Submitted to:- Prof. Vipin Agarwal Submitted by:- Biplab banerjee(PG-022) Manish Chaurasia(PG-037) Moumita Ghosh(PG-042) Prashant Kumar(PG-054) Leverage Analysis Capital structure decisions aims at determining the types of funds a company should seek to finance its investment opportunity and the preparation in which these funds should be raised. The term capital structure is used to represent the proportionate relationship between the various long-term forms of financing
Premium Operating leverage Variable cost Leverage