Bond Indentures and Covenants
Bond Indentures A bond indenture is a legal contract that outlines the obligations of the bond issuer and the rights of the bondholders. It’s often referred to as the bond indenture. This contract lays the groundwork for all subsequent transactions…
Features of a Fixed Income Security
Fixed-income securities encompass bonds and loans, serving as crucial avenues of debt financing for corporations and governments. These are formed under standardized agreements, where issuers obtain funds for operational or capital needs, and investors, in turn, lend their capital, expecting…
Types of Business Models
Conventional Business Models In practice, most business models consist of these conventional models either individually or combined. Common business models are described in the table below: In practice, most business models consist of these conventional models either individually or combined….
Key Features of Business Models
A business model outlines how a business is organized to deliver value to its customers. A business model encompasses the following aspects: Target customers of the business (“who?”). Products or Services offered by the business (“why and often “why”). Where…
Tests of Independence Using Contingency Table Data
With categorical or discrete data, correlation is not suitable for assessing relationships between variables. Instead, we use a non-parametric test called the chi-square test of independence, which employs a chi-square distributed test statistic. We employ a contingency table to structure…
Tests of Independence
Parametric versus Non-parametric Tests of Independence A parametric test is a hypothesis test concerning a population parameter used when the data has specific distribution assumptions. If these assumptions are not met, non-parametric tests are used. In summary, researchers use non-parametric…
Optimal Capital Structure
The target capital structure of a company refers to the capital the company is striving to obtain. In other words, target capital structure describes the mix of debt, preferred stock, and common equity expected to optimize a company’s stock price….
Modigliani-Miller Capital Structure Propositions
A firm’s capital structure is the mix of debt and equity it uses to finance its investments. A capital structure decision aims to determine the financial leverage to maximize a company’s value by minimizing the weighted average cost of capital…
Explain Factors Affecting Capital Structure
Both internal and external forces influence a corporation’s capital structure, varying among countries and sectors. These factors include: $$ \begin{array}{l|l} \text{Internal factors} & \text{External factors} \\ \hline \text{Business model characteristics} & \text{Market conditions} \\ \hline \text{Cash flows and Profitability} &…
