Capital Structure
For a small business, there are two major forms of financing. Debt is when the company borrows money. Debt for small businesses usually comes from a bank, and it often has a fixed schedule of repayments, and there is interest as well. The other form is equity, which is ownership in the business (Parker, 2012). Each has its advantages and disadvantages. Debt is risky, and indeed it increases the risk to the company because the payments must be made. As a result, the payments come from pre-tax earnings before there is money for reinvestment into the company or for disbursement to the shareholders. This obligation represents risk (Harley, 2013). Debt financing has two attractive advantages, however. The first is that it is cheaper than equity financing, and for a small business might be easier to acquire. The second is that debt financing allows for retention of ownership

With equity, a…...

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References

Harley, K. (2013). The difference between debt and equity financing for your small business. Mint Life. Retrieved February 28, 2014 from  https://www.mint.com/blog/consumer-iq/the-difference-between-debt-and-equity-financing-for-your-small-business-0613/ 

Parker, T. (2012). Small business financing: Debt or equity? Investopedia. Retrieved February 28, 2014 from  http://www.investopedia.com/financial-edge/1112/small-business-financing-debt-or-equity.aspx 

Peavler, R. (2014). Debt and equity financing. About.com. Retrieved February 28, 2014 from  http://bizfinance.about.com/od/generalinformatio1/a/debtequityfin.htm

Capital Structure
The three companies selected for this report are eBay, Clorox, and Darden Restaurants. eBay is an online auction website, acting as an intermediary between buyers and sellers. Clorox is described as being a manufacturer and marketer of consumer and institutional cleaning and household products. Some of its brands are the eponymous cleaners, Brita water filters, Burt's Bees and a variety of other brands as well. Darden Restaurants operates casual dining restaurant chains like Oliver Garden, Red Lobster and Longhorn Steakhouse. It has around 1900 restaurants in North America.

eBay's total current assets are $12.6 billion and its total assets are $27.3 billion. The current assets of Clorox are $1.2 billion and the total assets are $4.1 billion. For Darden Restaurants, the company's current assets are $663 million and its total assets are $5.4 billion.

For eBay, the company's current liabilities are $6.7 billion and the total liabilities are $9.3 billion. At…...

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Works Cited:

eNotes. (2012). Debt vs. equity financing. eNotes Retrieved March 25, 2012 from  http://www.enotes.com/debt-vs.-equity-financing-reference/debt-vs.-equity-financing 

Yahoo! Finance Clorox (2012). Retrieved March 25, 2012 from http://ca.finance.yahoo.com/q/pr?s=CLX 

Yahoo! Finance Darden Restaurants. Retrieved March 25, 2012 from  http://ca.finance.yahoo.com/q/pr?s=DRI 

Yahoo! Finance eBay. (2012). Retrieved March 25, 2012 from  http://ca.finance.yahoo.com/q/is?s=EBAY&annual

Capital Structure
A company's capital structure is the balance of different methods of financing that provides funding for the company's operations. The basic breakdown is between debt and equity, but preferred shares may also factor into the capital structure. Debt includes all forms of liabilities, including both long-term debt and current liabilities. Equity includes both the book value of shares issued and the company's retained earnings. The market value of the shares is not relevant in calculating the firm's capital structure. Analyzing the capital structure of the company is done by first calculating the capital structure. Because debt and equity have different risk characteristics, the ideal capital structure of the company must be evaluated against the type of business model that it has. Different risk profiles (capital structure) are considered ideal for different types of companies. This report will analyze the capital structures of three companies -- Goodyear (NYSE: GT), Campbell…...

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Works Cited:

Loth, R. (2006). Evaluating a company's capital structure. Investopedia. Retrieved October 4, 2011 from  http://www.investopedia.com/articles/basics/06/capitalstructure.asp 

MSN Moneycentral: Goodyear Tire and Rubber Co. (2011). Retrieved October 4, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&stmtView=Qtr&symbol=GT 

MSN Moneycentral: Hewlett Packard Co. (2011). Retrieved October 4, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&stmtView=Qtr&symbol=HPQ 

MSN Moneycentral: Campbell Soup Co. (2011). Retrieved October 4, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&stmtView=Qtr&symbol=CPB

Capital Structure
Modigliani and Miller argued that capital structure is irrelevant, all other things being equal, but in the real world those other things are never equal. The factors that are ruled out of MM are neutral taxes, no capital market frictions, symmetric access to credit markets, and that firm finance policy reveals no information. Normally, arguments against the irrelevance of capital structure are based on these factors that MM assumed away (Villamil, n.d.). In the U.S., taxes on dividends are very different from the taxes paid on loan interest. There are transaction and bankruptcy costs; firms cannot borrow and lend at the same rate, and financial policy does reveal information. As such, MM does not hold in the real world, and this implies that capital structure does matter.

That capital structure does matter implies that for every firm there is an optimal capital structure. hat that structure might be, however, is…...

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Works Cited:

Bradley, M., Jarrell, G. & Kim, E. (1984). On the existence of an optimal capital structure: Theory and evidence. The Journal of Finance. Vol. 39 (3) 857-878.

Goldman, D. (2012). Apple announces dividend and stock buyback. CNN Money. Retrieved April 10, 2012 from  http://money.cnn.com/2012/03/19/technology/apple-dividend/index.htm 

MSN Moneycentral. (2012). Clorox. Retrieved April 10, 2012 from  http://investing.money.msn.com/investments/stock-income-statement/?symbol=us%3aCLX 

MSN Moneycentral. (2012) Mattel. Retrieved April 10, 2012 from  http://investing.money.msn.com/investments/stock-balance-sheet/?symbol=us%3Amat&stmtView=Ann

Capital Structure Decision and Cost of Capital
In basic terms, capital structure has got to do with how companies finance their overall operations using various sources of funds. In this text, I recommend what is in my opinion the optimal capital structure for the three companies selected for purposes of this discussion. The companies that will be used for purposes of this discussion are: Alaska Air Group, the Clorox Group, and eBay.

Optimal Capital Structure: Analysis and ecommendations

In seeking to determine the optimal capital structure for each of the three firms, it would be prudent to rely on a number of factors including but not limited to each firm's profitability and liquidity, nature of industry, company characteristics, etc.

EBay

EBay is essentially one of the largest online retailers in the world. According to Yahoo Finance (2014), the company "provides online platforms, tools, and services to help individuals and merchants in online and mobile commerce…...

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References

EBay (2014). EBay Inc. Retrieved from  http://www.ebayinc.com/who_we_are/one_company 

Graham, J. & Smart, S.B. (2011). Introduction to Corporate Finance (3rd ed.). Mason, OH: Cengage Learning.

Pride, W.M. (2013). Business (12th ed.). Mason, OH: Cengage Learning.

Shim, J.K. & Siegel, J.G. (2008). Financial Management. New York: Barron's Educational Series.

Capital Structure
A project should not be evaluated in terms of capital structure. The financing of a project is a decision that is independent of the decision to undertake a project. This flows from the Modigliani and Miller Theorem where the choice of financing is irrelevant to the returns of the asset, all other factors being equal (Investopedia, 2012). The firm may have a preference for one type of financing or another, but those are not part of the investment decision. Indeed, the firm's existing capital structure is built into the weighted average cost of capital (ACC) calculation.

The distinction between the investor perspective and the company perspective is a falsehood. There is no such differentiation or conflict. The company exists to earn returns for the shareholder. Management acts as the agent of the shareholder, with the objective of maximizing shareholder return. Thus, the investor and the company are one and the…...

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Works Cited:

Investopedia (2012) Modigliani and Miller Theorem (M&M). Investopedia. Retrieved April 4, 2012 from  http://www.investopedia.com/terms/m/modigliani-millertheorem.asp#axzz1r632t1Nx 

Investopedia. (2012). Profitability index. Investopedia. Retrieved April 5, 2012 from  http://www.investopedia.com/terms/p/profitability.asp#axzz1r632t1Nx 

Kleiman, S. (2012). Agency theory. eNotes.com. Retrieved April 5, 2012 from  http://www.enotes.com/agency-theory-reference/agency-theory 

NetMBA.com (2010). Capital budgeting. NetMBA.com. Retrieved April 5, 2012 from  http://www.netmba.com/finance/capital/budgeting/

All theories of capital structure are considered supplementary. As Myers pointed out it is a 'kind of puzzle and every new theory fills a small gap'. (Does Capital Structure really matter?)
Evaluating the tradeoff and pecking order theory Shyam-Sunder and Myers by analyzing the debt patterns through time they could find out that under the pecking order model, "a regression of debt financing on the firms deficit of funds should yield a slope with efficiency close to unity." (Do changes in a firm's capital structure signal information to shareholders?) They were not able to discard such hypothesis on their test for 157 U.S. firms from the years 1971 to 1989. They then strived to experiment the efficacy of their test to discriminate against the static tradeoff model. It is the faith of Shyam-Sunder and Myers that the data supports the pecking order model. According to Chirinko and Singha, however the…...

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References

Aggarwal, Raj; Aung Kyaw, NyoNyo. 2004. Internal Capital Markets and Capital Structure Choices of U.S. Multinationals' Affiliates. December. Retrieved at   18 August, 2005http://www.fma.org/Chicago/Papers/SubCapStrFMA.pdf#search= 'Capital%20structure%20theories%20of%20companyAccessed

O'Sullivan. Karen. Do changes in a firm's capital structure signal information to shareholders. Retrieved at   Accessed 18 August, 2005http://www.csn.ul.ie/~karen/Articles/Maynooth%20Thesis/Thesis%20Interim%20Report.doc .

Pauwels, J.L. 2001.Does Capital Structure really matter? January. Retrieved at Accessed 18 August, 2005http://www-econo.gelso.unitn.it/cgilbert/fin2rapport.doc.

Prasad, Sanjiva; Green, Christopher J; Murinde, Victor. 2001. Company Financing, Capital Structure, and Ownership: A Survey, and Implications for Developing Economies. February. Retrieved at 18 August, 2005http://idpm.man.ac.uk/publications/archive/fd/fdwp27.pdf#search='Capital%20structure%20theories%20of%20companyAccessed

Capital Structure and the Dividend Policies
Investment in firms

Miller-Modigliani Theorem

Impact of taxes

Impacts of bankruptcy

Dividend Signaling

Clientele effect

The general principles for investment are applicable to every business and these may be outlined simply through saying the one should invest in projects that provide greater yields than the basic minimum acceptable rate. The rate is naturally to be dependent on the risk involved in the project. It should also reflect the basic financing mix used and this means the mixture of the owners' funds or equity or capital and borrowed money or debt. The returns from the project will have to be measured through the cash flows generated as also the timing of the cash flows, and these cash flows can be either additive or depletive.

The important part of financial management is to choose a correct financial mix that gets a return as per the current cost of money and are also commensurate with…...

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Bibliography

Damodaran, Aswath. "Corporate Finance: Lecture Note Packet 2" Retrieved at   Accessed on 06/08/2004http://pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/cfpacket2.pdf .

Harvey, Campbell R. (December 4, 1995) "Capital Structure and Payout Policies" Retrieved at   Accessed on 06/08/2004http://www.duke.edu/~charvey/Classes/ba350/capstruc/capstruc.htm .

Distributions to Shareholders and Dividends and Repurchases" Retrieved at Accessed on 06/08/2004http://www.business.umt.edu/faculty/Crawford/FIN%20439/Fin%20439%20Spring%202004/Notes/Chapter%2016.doc.

Koch, Paul D; Shenoy, Catherine. "The Information Content of Dividend and Capital Structure Policies" Retrieved at Accessed on 06/08/2004http://lark.cc.ku.edu/~cshenoy/Research%20Papers/FMArticle2.pdf.

1).
Little study has been conducted of Indian firms debt-to-book rations before Rajagopal, but he indicates that, given the relatively recent expansion of India's economy, the difference between the U.S. And India, for example,, is not nearly as prohibitively large a one might suspect. This is not to deny that India faces persistent challenges unique in its place in the world: the nation has been "traditionally weighed down by heavily regulated capital markets, opaque accounting and disclosure, and weak corporate governance," but "its economy has seen significant market reform and liberalization since July 1991. As a result, total market capitalization has exploded (for example, tripling between 2002 and 2006), and debt issuance and M&a activity have also seen very significant growth" (Rajagopal 2009, p.28). Changes in the expanding world economy have surprised many analysts in terms of the seismic shift in India's business culture and ability to rationally deploy capital.

Indian businesses…...

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Works Cited

Amortization. (2009). Money terms. Retrieved September 6, 2009 at  http://moneyterms.co.uk/amortisation/ 

Pardasani, Manoj. (2009, September). India initiates thin capitalization. (2009, September).

Businessline. Retrieved September 6, 2009, from ProQuest Asian Business and Reference. (Document ID: 1852788851)

Rajagopal, S. (2009). "On the portability of capital structure theory," Allied Academies

Capital Structure
The optimal capital structure depends on a number of factors. The nature of the business that the company is in is important, in particular the fluctuations in the company's cash flows. The company should also consider the time frame for which the capital is being used. In addition, the optimal capital structure also depends on the degree to which the company is willing to cede control, and the cost of capital that it desires (Kennon, 2011). Thus, for every different firm there will be a different optimal capital structure.

Mattel is in a stable business, its revenues ranging between $5.4 and $5.9 billion in each of the past five years and its net income fluctuating between $379 million and $684 million during that same period (MSN Moneycentral, 2011, 1). This high level of predictability in the firm's business means that it can handle a high degree of leverage. The financing…...

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Works Cited:

Kennon, J. (2011). An introduction to capital structure. About.com. Retrieved May 31, 2011 from  http://beginnersinvest.about.com/od/financialratio/a/capital-structure.htm 

MSN Moneycentral. (2011). Mattel. Retrieved May 31, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=MAT 

MSN Moneycentral. (2011). Clorox. Retrieved May 31, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=CLX 

MSN Moneycentral. (2011). MGM International. Retrieved May 31, 2011 from  http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=MGM

Introduction
Corporate finance focuses on financial decisions made by financial managers. Financial decisions is broadly categorized into two: financing decisions and investment decisions (Renzetti, 2001). Investment decisions determines the composition of assets held by a firm while financing decisions focuses on the optimal mix of debts and equity (capital structure). An optimal capital structure can be defined as a combination of equity and debt that maximizes shareholders’ wealth or value of a firm. The value of a firm “is the present value of expected future cash flows to be generated by the assets, discounted at the company’s weighted average cost of capital (WACC). Generally, the determination of optimal capital structure is a complex decision process involving calculations of various debt-equity ratio. In this paper, the capital structure of Afterpay Touch Group Limited (ATP), FlexiGroup Limited (FXL), and Zip Co Limited (Z1P) will be calculated, theories of optimal capital structure will be…...

Capital Structure Avenues that can Impact the ValueHow capital structure affects worth is depended on the debt effect on the weighted average cost of capital and or free cash flow. A series of steps must be followed to the capital structure understudy to get the weighted average cost of money. First, evaluate the lowered beta and cost of equity. The second step is to estimate the interest rate and cost of debt, find the weighted average cost of capital, and finally calculate the value of operations. The value of operations is the present value of free cash flows discounted by the new weighted average cost of capital. This process aims at finding the amount of debt financing that will maximize the value of the operation. Capital structure is also known for maximizing shareholder wealth and the intrinsic price of inventory.As the ratio of debt rises, both equity and debt costs…...

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References

Al-Mutairi, A., Naser, K., & Saeid, M. (2018). Capital budgeting practices by non-financial companies listed on Kuwait Stock Exchange (KSE). Cogent Economics & Finance, 6(1), 1468232.

Graham, P. J., & Sathye, M. (2017). Does national culture impact capital budgeting systems?. Australasian Accounting, Business and Finance Journal, 11(2), 43-60.

Kumar, S., Colombage, S., & Rao, P. (2017). Research on capital structure determinants: a review and future directions. International Journal of Managerial Finance.

Capital Structures
Essentially, there are really only two ways in which organizations can raise money -- debt or equity. The core of this comes down to cash flow for each type of financing. A debt claim, for instance, allows the holder to a set of cash flow, typically principle and interest; an equity claim entitles the holder to any leftover cash after meeting all other claims. Secondly, debt has prior claim on cash flow and assets. This complicates the matter of the way debt is managed and analyzed when looking at different industries. For instance, debt as a percentage of the market value of equity in an airline would be different than one in say, electronics -- all dependent upon a variety of inventory and supply/demand, price elasticity ratios.

Organizations that have high debt-equity ratios seem to be the ones that have longer term, or higher cost-based services; or those that are…...

The cyclicality of Choice, evidenced by their beta, and the intense competitive pressures, means that the firm is at risk for periods of difficulty. If they are too highly-leveraged, these periods could cause irreparable harm to the company. Ideally, Choice would limit the downside damage caused by the inevitable turbulent times. The medium debt ratio achieves this.
The ideal capital structure for Dell Computers is a high debt ratio. Dell's business is growing. From their beta we can infer that Dell itself is relatively stable, since they have such a broad customer base. They sell to both businesses and consumers, with several of their product lines being business only. Thus, the bulk of their risk is market risk.

The high debt ratio gives Dell sufficient leverage to participate in their industry's growth. ithout a strong cyclical downside, they are in a good position to take on a higher debt ratio, since…...

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Works Cited

Betas, Balance Sheets, Income Statements and Business Descriptions on all three companies obtained July 30, 2008 from Reuters.

Hatfield, Gay; Cheng, Louis; and Davidson, Wallace. (1994). The Determination of Optimal Capital Structure: The Effect of Firm and Industry Debt Ratios on Market Value. Journal of Financial and Strategic Decisions. Retrieved July 30, 2008 at  http://www.studyfinance.com/jfsd/pdffiles/v7n3/hatfield.pdf

Capital Structure Decision and Cost of Capital
My SLP Company of choice is Wal-Mart Stores. The other two companies I will be relying on for purposes of this discussion are Target Corp. And Costco Wholesale Corporation. Both companies happen to be in the same industry as Wal-Mart Stores. Most specifically, this text will compute the debt ratio and the debt-to-equity ratio of Wal-Mart Stores and discuss whether or not these ratios could be regarded too large or too small. Further, comparisons will be made between the debt-to-equity ratio of Wal-Mart Stores and that of its two competitors - Target and Costco.

The debt ratio in the words of Graham and Smart (2011, p. 44) is "a measure of the proportion of total assets financed by a firm's creditors." It is computed by dividing the total debt figure with the summation of equity and total liabilities. All the dollar figures below are in…...

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References

Borowski, A. (2010). Financial Management: The Role and Importance of Capital Markets and EMH. Norderstedt Germany: GRIN Verlag.

Graham, J. & Smart, S.B. (2011). Introduction to Corporate Finance (3rd ed.). Mason, OH: Cengage Learning.

Porter, G.A. & Norton, C.L. (2010). Financial Accounting: The Impact on Decision Makers (7th ed.). Mason, OH: Cengage Learning.

Quiry, P., Fur, Y.L., Salvi, A., Dallochio, M. & Vernimmen, P. (2011). Corporate Finance: Theory and Practice (3rd ed.). Chichester, West Sussex: John Wiley & Sons.

Levels of Business Strategies

Business strategies are the plans and actions that a company undertakes to achieve its objectives. These strategies can be classified into three distinct levels: corporate-level strategies, business-level strategies, and functional-level strategies.

1. Corporate-Level Strategies

Corporate-level strategies are broad in scope and provide the overall direction for the entire organization. They define the company's mission, vision, and values, and establish the overall goals and objectives. Corporate-level strategies also determine the company's relationship with its external environment, including its competitors, customers, suppliers, and the regulatory environment.

There are three main types of corporate-level strategies:

Growth strategies: These strategies focus on expanding the....