Corporate finance

advantages of debt finance are interest is tax deductible; and debt holders are limited to a fixed return and they do not have voting right (J. Chris Leach & Ronald W. Melicher, 2014). For our business plan, we all evaluate the debt-equity ratio at the optimal level, which offers a balance between business risk and financial risk. 2.2.5 Learning According to my personal perspective and group viewpoint, we learned the following aspects from the combined presentation. For traditional bank…

Modigliani and Miller (1958) provided a new theory of capital structure, suggesting that a firm’s choice between debt and equity has no impact on the firm’s value. This became known as irrelevance theorem. However, this theory is surrounded by a number of assumptions that can be analyzed in turn. The first assumption from Modigliani and Miller (1958) is that firms operate within a perfect capital market. The perfect capital market is defined by Fabozzi, Neave and Zhou (2012, p 87). Firstly,…

Question 1. Ex-ante rationales like market reward cannot explain the meaning of patents system (Kesan, 2015). According to Kesan (2015), there are three economic rationales of ex-post of the patents system. First, patents system creates a basic market for inventors and buyers and make the whole innovation system more efficient. As a matured system, rules about how to apply, how to protect, and how to track these patents already existed. Therefore, when inventors or companies have something…

RICH DAD POOR DAD (book review) I have recently read this book called rich dad poor dad. This book is written by Robert T. Kiyosaki in 1997. This book tells the importance of financial literacy, financial independence, starting or owning a business, investment real estate, building through investing in assets and increasing someone’s financial intelligence. The book is very clearly structured and easy to learn, as we start reading this book,…

Case Analysis: Strategic Outsourcing at Bharti Airtel Limited Submitted by: Bhuvnesh Prakash (PGP/18/188) Group No: 6 Section- D Introduction: Mittal founded Bharti In 1995 with $900 in start-up capital. In 1999, Bharti sold a 20% equity interest to the private equity from Warburg Pincus. In 2000 it went public on the Indian National Stock Exchange, the Mumbai exchange and the Delhi stock exchange, raising $172 million in its IPO. In 2001-2002, it obtained licence for 15 out of India’s 23…

and equity are the principal components of a company’s long term capital and capital structure describes this composition (combination of debt and equity) of the company’s permanent/long term capital. Capital structure is an indicator of how a firm finances its overall operations and growth using the different sources of funds available. It is a mix of long-term debt, short-term debt, common equity and preferred equity. Debt is in the form of bond issues or long-term notes payable while equity…

“There are two main schools of thought in respect to Dividend Policy: the Relevance and the Irrelevance Theories” Explain briefly. What is so important about the Dividend Policy? One of the four main things, any company can do with its profits is to increase equity either by paying the shareholders in the form of a dividend or postponing this payment in the form of a reserve. Furthermore, the amount to pay as dividends is one of the crucial financial decisions the company has to take…

Cash flow analysis Cash flow analysis is considered to be most important among the financial statements as it helps to identify how strong is company in generating cash for paying its bills, creditors’ suppliers and to make necessary investments. A company may have a strong balance sheet and income statement, but if it doesn’t have enough cash to pay its suppliers /creditors then it will lose its business and finally gets shut down. A positive cash flow means that enough cash is coming to…

The case talks about decisions board has to make about special dividends. The CFO has made a report for the Board. Linear could repurchase shares instead? Or Linear tech could pay out its entire cash balance as a special dividend, Linear Technology payout policy. The company was founded in 1981 in California, by Robert Swanson. IPO was in 1986 ,NASDAQ. They manufacture custom-design integrated circuits (semiconductors) for electronic applications in the telecommunication, computer and the…

Pros & Gains of P.I.P.E Transactions 1. A large lot or a quantum of shares can be sold to well-informed investors on a long term, ensuring the company to meet its funding needs. 2. PIPE shares do not need registration with the Stock Exchange, transactions are handled with fewer administrative requirements than secondary offerings. 3. The investment is made upon a predetermined fixed price therefore it overrules the threat of under subscription. 4. No fresh Public issue is required for any…