[vsw id=”ZLrxAugcvo8″ source=”youtube” width=”611″ height=”344″ autoplay=”no”] The maturity, capital intensity, market position strength, and the stability and nature of a company’s operation are all elements that influence its capital structure and ability to support debt. As a general rule, companies…

[vsw id=”ZLrxAugcvo8″ source=”youtube” width=”611″ height=”344″ autoplay=”no”] Both internal and external forces influence a corporation’s capital structure, and it varies among countries and sectors. These factors include: $$ \begin{array}{l|l} \textbf { Internal Factors } & \textbf { External Factors } \\…

[vsw id=”HkoJ_nedolg” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Taxes significantly impact the weighted average cost of capital (WACC) of a company. However, taxes affect the cost of capital from different sources of capital in different ways. The Effect of Taxes on Debt…

[vsw id=”HkoJ_nedolg” source=”youtube” width=”611″ height=”344″ autoplay=”no”] A company can increase its common equity either by reinvesting its earnings or issuing new stock. The cost of equity will, therefore, be the rate of return that its shareholders require. Three methods are…

[vsw id=”HkoJ_nedolg” source=”youtube” width=”611″ height=”344″ autoplay=”no”] The concept of cost of capital informs the investment decisions that a company’s management makes. Similarly, it is useful in the valuation of a company by investors and analysts. A company that invests in…

[vsw id=”qwQXR6SdLvA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] A company’s liquidity determines its creditworthiness and capacity to borrow at cheaper rates and with better credit conditions, increasing its flexibility. The less liquid it is, the more likely a corporation is to go…

[vsw id=”mpz9JHQoarw” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date. In the same vein, real options are capital…

[vsw id=”qwQXR6SdLvA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] The degree to which a corporation can satisfy its short-term obligations using cash flows and assets that it can quickly convert into cash is referred to as liquidity. In this context, liquidity refers to…

[vsw id=”qwQXR6SdLvA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Successful businesses aim to strike a balance between funds set aside for current assets and the risk of current asset shortages. Each company has different needs for working capital. Retail enterprises, for example, focus…

[vsw id=”UO4w5yNuWdw” source=”youtube” width=”611″ height=”344″ autoplay=”no”] “Breakeven point” or “breakeven quantity of sales” refers to the number of units of a company’s product that is produced and sold, at which point the company’s net income becomes zero. Computing Breakeven Quantity…