Capital Structure Decisions: Which Factors Are Reliably Important? Murray Z. Frank and Vidhan K. Goyal∗ This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market leverage are: median industry leverage (+ effect on leverage), market-to-book assets ratio (−), tangibility (+), profits (−), log of assets (+), and expected inflation (+). In addition, we find that
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tidak dapat memenuhi beban bunga maka tidak tertutup kemungkinan dilakukan tindakan likuidasi. Bauran hutang dan ekuitas untuk pendanaan perusahaan merupakan bahasan utama dari keputusan struktur modal (= capital structure decision). Bauran modal yang efisien dapat menekan biaya modal (= cost of capital), yang dapat meningkatkan kembalian ekonomi neto dan meningkatkan nilai perusahaan. Perusahaan yang hanya menggunakan ekuitas disebut “unlevered firm”, sedangkan yang menggunakan bauran ekuitas dan berbagai
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International Review of Finance, 11:1, 2011: pp. 1–17 DOI: 10.1111/j.1468-2443.2010.01125.x Two Common Problems in Capital Structure Research: The FinancialDebt-To-Asset Ratio and Issuing Activity Versus Leverage Changes IVO WELCH Brown University, RI and NBER ABSTRACT This paper points out two common problems in capital structure research. First, although it is not clear whether non-financial liabilities should be considered debt, they should never be considered as equity. Yet, the common financial-debt-to-asset
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DETERMINANTS OF CAPITAL STRUCTURE Introduction Modern theory of capital structure instigated with the seminal paper of Modigliani and Miller [1]. In brief, the MM theory states that the market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent from its corporate financing decisions. In fact, the MM theory provided conditions under which a firm’s financial decisions do not affect the value of the firm. The fundamental conditions under which
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NC 27708, USA National Bureau of Economic Research, Cambridge, MA 02912, USA Received 2 August 1999; received in revised form 10 December 1999 Abstract We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large "rms rely heavily on present value techniques and the capital asset pricing model, while small "rms are relatively likely to use the payback criterion. A surprising number of "rms use "rm risk rather than project risk in evaluating new investments. Firms
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27708, USA National Bureau of Economic Research, Cambridge, MA 02912, USA Received 2 August 1999; received in revised form 10 December 1999 Abstract We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large "rms rely heavily on present value techniques and the capital asset pricing model, while small "rms are relatively likely to use the payback criterion. A surprising number of "rms use "rm risk rather than project risk in evaluating new investments. Firms
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9-104-071 REV: SEPTEMBER 14, 2007 ROBERT S. KAPLAN DAVID KIRON Accounting Fraud at WorldCom WorldCom could not have failed as a result of the actions of a limited number of individuals. Rather, there was a broad breakdown of the system of internal controls, corporate governance and individual responsibility, all of which worked together to create a culture in which few persons took responsibility until it was too late. — Richard Thornburgh, former U.S. attorney general1 On July
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THE COST OF CAPITAL Brealey, Myers, and Allen Principles of Corporate Finance Principles Brealey, Myers,Finance of Corporate and Allen 10th Edition 11th Edition Presented by: Nguyen Xuan Thang Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. 9-1 COMPANY AND PROJECT COSTS OF CAPITAL • Firm Value • Sum of value of assets Firm value PV(AB) PV(A) PV(B) 9-2 1 25/03/2014 FIGURE 9.1 COMPANY COST OF CAPITAL • A company’s cost of capital can be compared
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products, and products for babies and children. This report has been prepared with the objective of examine financial health of David Jones. The achieve the objective, five key financial ratio analysis: Profitability, Liquidity, Asset Efficiency, Capital Structure has been use throughout the report David’s Jone’s profit margin has declined by 9% in year 2012 with $0.8 cent of net profit derived from every dollar of total sales in year 2012. Declined result in Return on Equity (ROE), Return on Asset (ROA)
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PROPOSITIONS M-M Proposition 1: In competitive, transaction costless, information efficient markets, with no taxes, the market value of the firm (i.e., market value of all of its securities) is independent of the firm’s capital structure. That is, [pic] = [pic] (see definition below) [Brealey, Myers and Allen, Chapter 17] The proof of this proposition is based on the following arbitrage property of perfect markets. Arbitrage Property: Two identical assets must have the same market price. Two assets are
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