Capital structure is one of the major financing decisions affecting the market value of the firm. Capital structure is the combination of the different sources of funds, debt and equity, a firm uses to finance its economic operations and growth. Capital structure decision is concerned with the issue of whether changes in financing arrangement will influence the value of the firm. In recent times, poor capital structure decision resulting to huge debt without commensurate investment in assets has been identified as a major factor that continue to plunge a number of firms into bankruptcy (Ehikioya, 2009). Financing managers have the responsibility to set optimal capital structure that would improve on the value of the firm for the overall interest Similar to the observed firm characteristics, the environment for different reasons is equally an important factor that influences capital structure decisions. According to Antoniou et al, (2002), the legal and tax environments as well as economic system and technological capabilities exert some degree of influence on firm’s capital structure. This argument is supported by De Jong et al. (2008) who opined that both microeconomic conditions and the firms’ specific characteristics affect firms’ financing decisions. In Nigeria, like in some other countries, for firms to expand business operations or evolve new products, requires the use of equity or debt (or a combination of the two sources) which comes in the form of bond or long term notes payable on maturity. Nigeria managers are continually inundated with the choice of capital structure that would increase the value of the firm. This challenge is further exacerbated by country specific factors like institutional and governance structures, legal environment, macroeconomic factors and financial system development factors among many Capital structure is an important strategy at the disposal of managers to maximize the value of the firm. It is significant to understand how firms in Nigeria set their optimal capital structure that will improve firm performance. Also, it is instructing to know how debt impact on firms’ performance in Nigeria. Thus, the main thrust of this study is to empirically examine the impact of capital structure on the performance of firms in Nigeria. In other words, this study aims to examine the correlation between corporate capital structure decisions and firm performance in Nigeria. This study will assist managers to understand how the choice of capital structure impact on the performance of firms. Also, the study will guide managers on how to set optimal capital structure that will not only improve on performance but will serve the interest of all the
the organization. The results of a working capital analysis will assist in the determination of organization¡¦s ability to remain in a particular line of business. The primary focus of Team C¡¦s analysis of Wal-Mart, Inc is its current and future financial condition. The most imperative areas that are found in the Capital Structure Analysis Report fall into the following categories: Working Capital Management, Valuation and Investment, and Cost of Capital. The company¡¦s operational processes within…
Canadian Airline sector with focus on WestJet Capital Structure Due: Thursday October 9, 11:30 am for all classes Groups: You may work in a group; maximum of 4 students. You are under no obligation to work in a group and may work with students from any section. TASK: 1. Determine the current WACC for firms in the Canadian airline sector focusing on WestJet Airlines (Ticker Symbol for the S&P/TSX is WJA) 2. Analyze the current capital structure in the context of the industry and the firm’s…
Corporation | Case Study | | Table of Contents Introduction 3 Background 3 Culture of the Business 3 Stages of Development 3 Core problem 4 analysis and options 4 Risk analysis 5 First: The Business Risk 5 Second: The Financial Risk 6 Other kinds of risk: 7 Financial Analysis 7 The WAAC 7 Ratio Analysis 11 Recommendations: 12 References: 12 Introduction Background In 1981, AHP had reached sales of more than $4 billion by producing 1,500 marketed brands in…
JET2 Task 5 Financial Analysis MBA Program Getting Started 08/06/2013 What is JET2 Task 5? • Task 5 is like a ‘capstone’ task for the entire JET2 performance assessment • The task is based on elements within the first four tasks in JET2 and requires additional critical thinking • It is suggested that Tasks 1 – 4 be completed first. Additional Resources • Help Documents and discussion about the course are posted in the MBA Financial Analysis Learning Community • A Study Session is held weekly…
performance. The reason for addressing this phenomenon is that decisions relating to capital structure have always been substantial ones that companies confront and plays an important role in setting financial strategies for the company. This literature review also evaluates the theoretical framework on which the journals were based. 1.1 INTRODUCTION Literature review will be based on the relationship between capital structure and firm performance. In so doing it will evaluate the work of the past researchers…
BUACC1506 Topic Six: Analysis & Interpretation of Financial Reports Chapter Eight 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Identify why different user groups require financial reports to be analysed and interpreted Understand the nature and purpose of financial analysis Appreciate the analytical methods of horizontal analysis, trend analysis, vertical analysis and ratio analysis Define profitability and be able to describe and calculate the ratios that measure profitability Define asset efficiency and be…
QUESTIONS 28 total question / 4 – 7 questions each. 1. Explain the importance of risk adjustment in the capital budgeting allocation process by answering the following questions. a. Explain why risk adjustments are important and how they can affect firm value. Risk adjustments are important because if they are not used than expectations for projects will be unrealistic. It is necessary to use risk adjustments because you may accept a high risk project that should have been rejected which could…
risk adjustment in the capital budgeting allocation process by answering the following questions. a. Explain why risk adjustments are important and how they can affect firm value. Without the correct risk adjustment the firms stock will lose value by taking on high risk projects. The firm could also be considered uncompetitive if they reject low cost/low risk projects. b. Explain how the single hurdle rate currently used by Northern Forest Products can change the risk structure of the company. For…