First of all, we understand that ever since you assumed the post, you have adopted the policy of financing your business with a strictly low amount of debt. With all due respect, we would like to present our analysis of your current capital structure in order to give some insights that might cause you to reconsider this policy and to delve into the possibility of adopting a better one.
Our in-depth examination of the issue at hand led our team to propose a capital structure of 70% debt as the optimal one. To begin, utilizing more debt for financing purposes would entail a greater EPS (earnings-per-share) and a higher return for your stakeholders’ equity, without jeopardizing your ability to pay your obligations. Moreover, compared to the other capital structure alternatives, our chosen debt ratio would result in the highest market capitalization.

An Opportunity for Wealth Maximization

We are impressed at how great the management is in maximizing the wealth of the shareholders through a very high level and growing sales figures, EPS and market capitalization. However, we found out that there is still room for further improvement especially when speaking of shareholders’ wealth maximization objective. As we can see in the graph below, your company is approaching the point where the growth rates of sales and EPS are dwindling.

If the growth rates continue to decline and reach the point of stabilization, your company’s perfomance may suffer. Thus, to mitigate this effect, your capital structure may be altered to achieve the