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Chapter 15 dandy social organization Policy agendum ? ? Learning Objectives Principles Used in This Chapter 1.A see at not bad(p) Structure Choices in entrust 2. hood Structure Theory 3.Why Do Capital Structures Differ Across Industries? 4.Making backing Decisions Learning Objectives 1. 2. 3. differentiate a truehearteds smashing bodily anatomical structure. Explain wherefore crockeds have different smashing structures and how chief city structure influences a planetary houses weighted mediocre g g cost of capital. Use the basic tools of fiscal synopsis to analyze a steadys funding decision. 1 Principles Used in This Chapter ? 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 get on the billetholders investment in the firm. ? Ho e e this high return comes with a cost. However, highe et n ith cost ? The higher(prenominal) use of debt finan cial backing makes the firms stock riskier, which increases the required rate of return on stock. ? In addition, it increases the heedlessness risk of the firm. Principles Used in This Chapter ? Principle 3: notes Flows Are the Source of Value. ? Capital structure choice impacts the funds flows and thus affects the measure of the firm. 15.

1 A Glance at Capital Structure Choices in Practice 2 A Glance at Capital Structure Choices in Practice ? The main(a) objective of capital structure management is to maximize the encourage of the shareholders beauteousness. The resulting financing mix tha t maximizes shareholder value is called the ! optimal capital structure. ? Defining the Firms Capital Structure ? A firms capital structure consists of owners equity and its interest bearing debt, including short-term bank loans. The junto of firms capital structure plus the firms non-interest bearing liabilities such as accounts payable is called the firms financial structure. ? Defining the Firms Capital Structure ? A firms financial structure is often described...If you loss to get a full essay, revisal it on our website: BestEssayCheap.com

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