Essay on Capital Structure of Sonoco

1742 Words Jul 28th, 2014 7 Pages
Capital Structure of Sonoco

By: Glenn C. Mack

FIN 560 Financial Management of the Enterprise Salem International University June 15th 2014

In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's leverage. In reality, capital structure may be highly complex and include dozens of sources. Gearing
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The company originally manufactured paper cones used by the textile industry to wind yarn. As the company expanded and diversified, Sonoco began to manufacture additional products such as molded plastic cones and tubes, toner cartridges, caulking cartridges, composite containers (used for refrigerated dough, frozen juice concentrates and other foods), fiber and plastic drums used for chemicals and pharmaceuticals, tennis ball containers, paperboard, packaging forms, and cap seals, to name a few. Sonoco had its beginnings in 1890, when Major James L. Coker and his son, James, Jr., founded the Carolina Fiber Company in Hartsville, South Carolina, to manufacture pulp and paper from Southern Pine trees. The enterprise was based on James, Jr.'s senior thesis, which outlined how to make paper pulp using a chemical process. A few years later, after unsuccessful attempts to sell the pulp commercially, the Cokers decided to use the pulp to make paper cones for the textile industry. On April 15, 1899, Maj. Coker and W. F. Smith formed the Southern Novelty Company, with Coker as the first president. The company ordered a Fourdrinier paper machine, which was built for $19,050. The machine was capable of turning out five to eight tons of paper in 24 hours. One year after its founding, the new company had sales of $17,000 and net earnings of $2,000. As the 20th century dawned, the textile industry in the South began to grow and prosper, and Sonoco's yarn

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