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Essay / Research Paper Abstract
A 5 page paper discussing optimum capital structure, market capitalization, bank loans, tax planning and assessing results based on ROE and the DuPont Identity as five tools available to organizations as long-term and short-term strategies for corporate financial management. Bibliography lists 4 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSfinTools.rtf
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Unformatted sample text from the term paper:
to organizations in forming their overall capital structure. This paper discusses optimum capital structure, market capitalization, bank loans, tax planning and assessing results based on ROE and the DuPont
Identity as five tools available to organizations as long-term and short-term strategies for corporate financial management. Optimal Capital Structure The optimal capital structure
is that which "maximizes the value of the firm" (Corporate Finance, 2004). The "total value of the firm is the sum of the value of its equity and the
value of its debt" (Corporate Finance, 2004). Debt can be in several forms, however, each of which needs to be carefully managed to provide maximum benefit to the company.
Market Capitalization Always, the least costly form of outside capital is that provided by investors as they purchase stock in the company.
Aside from that, "There are two sources of cash: reducing assets or increasing liabilities or equity" (Corporate Finance, 2004). Within the choice to increase liabilities lie many others, all
of which have the ability to directly affect the value of the firm and its ability to operate with sufficient cash flow. Bonds
One choice available is to sell corporate bonds. Because investors are foregoing other opportunities, interest rates on corporate bonds can be higher than on some types of bank financing.
Nevertheless, they are an option that many companies use as part of their total capital structure. Bank Loans Securing bank loans generally
is the most straightforward method of obtaining outside financing. They also constitute the most efficient method of balancing the organizations capital structure. Bank loans are available in a
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