Business Financing and the Capital StructureDue Week 8 and worth pointsBusinesses have to make many financial decisions that have a direct impact on operations and the ability to successfully compete in the marketplace. Base your writing on the information from the course coupled with information located in the Strayer databases or Internet. Write a two to three page paper in which you: Assume that you are financial advisor to a business.
A preview of capital structure issues In regards to the overall business environment, capital structure has profound implications of the business, irrespective of its industry.
For one, a firm's capital structure is then the composition or 'structure' of its liabilities. This leverage has implications on the entire firm. For example, leverage in many respects is a double edges sword.
On one hand, leverage can amplify gains for firms. However, if used incorrectly, leverage can also amplify loses. As such, firms must be cognizant of its capital structure as complacency can hinder overall business performance. Debt and equity financing, can have a profound implications on the business overall.
In particular, prevailing interest rates can better determine adequate means of debt or equity financing. Taking the prevailing interest rates today would suggest that debt financing may be ideal for more capital intensive businesses. For one, many companies can lock in fixed terms at todays very low rates.
These rates are often outpaced by inflation. As such, companies may find a capital structure skewed heavily towards debt financing to be very advantageous.
For one, the low interest rate environment makes debt financing very attractive relative to equity. Furthermore, macroeconomic considerations seem to preclude massive amounts of impending inflation. As such, companies can pay debtors back in heavily depreciated dollars. This too is advantageous to the firm as it can have access to very cheap, low cost forms of funding Timmer, The overall macroeconomic environment therefore, does provide a foundation by which companies decide on their capital structure.
In many companies equity financing is much more expensive relative to its debt counterpart. Debt, at current rates is very cheap. This cheap financing allows companies to purchase other companies, expand into international markets, purchase property, and otherwise expand the business.
However, companies must be leery of how they use debt in regards to capital projects. In some instances, adverse economic situations can cause undue hardship on a corporation heavily levered with debt.
Once this debt becomes due, it may be difficult for the firm to cover interest expense. As such companies must be mindful of their overall capital structure.
Coca Cola is unique in that its product offering is highly differentiated in regards to its brand. Coca-Cola is ubiquitous around the world.
Its brand is very powerful and easily recognizable. The brand is everywhere consumers are happy. This includes the Olympics, the World Cup, movies, restaurants, theme parks, universities, and much more. This brand image provides a buffer in regards to its capital structure. Consumers are often willing to pay more for Coke products relative to its peers in the industry simply due to the brand image.
As such, Coke has the ability to manipulate its capital structure in a manner very unique for a company in its industry Lyandres, Business and financial risks related to capital structure The possibility that a company will have lower than anticipated profits, or that it will experience a loss rather than a profit can be quite larger relative to prevailing macroeconomic factors.
For instance, retail companies depend heavily on discretionary income of its customers. If consumers believe the future to be difficult, they may curtail spending until conditions improve.
This pessimistic attitude towards consumptions can have adverse consequences for a firm that is heavily financed through debt. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, and overall economic climate and government regulations.Base your writing on the information from the course coupled with information located in the Strayer databases or lausannecongress2018.com a two to three () page paper in which you:Assume that you are financial advisor to a business.
Capital structure is the one of the most important concept related to finance that is used by the most of business firms in order to evaluate their business performance.
Capital structure is basically a set of liabilities that are currently in the business. - Target Corporation: Report on Long-term Financing Policy and Capital Structure with an Acquisition Analysis Introduction This report will be based on the Target Corporation, and will consist of two sections: 1) long-term financing policy and capital structure, and 2) an acquisition analysis.
Business Financing and the Capital Structure Raising Business Capital As a financial advisor to this business there are two options to consider for raising business capital, equity financing and debt financing. The term capital structure refers to the percentage of capital (money) at work in a business by type.
Broadly speaking, there are two forms of capital: equity capital and debt capital. Each type of capital has its benefits and drawbacks, and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure regarding risk/reward payoff for shareholders.
These include risks, maturity, yield, and liquidity. Assume that you are financial advisor to a business. Describe the advice that you would give to the client for raising business .
- Target Corporation: Report on Long-term Financing Policy and Capital Structure with an Acquisition Analysis Introduction This report will be based on the Target Corporation, and will consist of two sections: 1) long-term financing policy and capital structure, and 2) an acquisition analysis. Assignment #2: Business Financing and the Capital Structure Marquis C. Saddler Professor Jason Powers FIN December 1, Business Financing and the Capital Structure Explain the process of financial planning used to estimate asset investment requirements for a corporation. Product Description. FIN Week 8 Assignment 2 – Business Financing and the Capital Structure. Businesses have to make many financial decisions that have a direct impact on operations and the ability to successfully compete in the marketplace.