Capital structur 18sep2012

810 views
683 views

Published on

this is made by devendra ojha and give presentation in govt college aron

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
810
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
37
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Capital structur 18sep2012

  1. 1. Capital StructurePresented by Devendra ojha BBA v semMail-id ojhad25@gmail.com
  2. 2. OutlineMeaning of Capital StructureSource of capitalCapital structure of multinational firmsFour main capital structure theories
  3. 3. Meaning of Capital StructureCapital Structure refers to the combination or mix of debt and equity which a company uses to finance its long term operations.
  4. 4. Source of Capital
  5. 5. CAPITAL STRUCTURE OFMULTINATIONAL FIRMSCapital structure for the multinational firm involves a choice between debt and equity financing across all its subsidiaries. A MNC can have more debt in its capital structure if its cash flows are more stable and it has a low credit risk.
  6. 6. Four main capital structure theories Net income approach Net operating income approach Traditional approach Modigliani and miller approach
  7. 7. Net income approach This approach being propounded by durand The cost of debt is lower than the cost of equity The risk perception of investors is not changed by the use of debt. There are no tax.
  8. 8. Net operating income approach This approach also propounded by durand The cost of debt is lower than the cost of equity Cost of debt are constant If we increase proportion of debt capital than overall cost of capital decrease but same time interest burden on company increase These are no corporate tax .
  9. 9. Traditional approach increase in leverage does not affect the overall cost of capital and the value of the firm Higher demanding of return Point of Optimum capital structure
  10. 10. Modigliani- miller approach Feature1. Capital markets are perfect2. Homogeneous risk classes of firm3. Expectations about the net operating income4. Dividend payout ratio 100%5. No corporate taxes

×