Capital structure theories introduction capital structure decision is a significant decision in financial management. Ppt the capital structure powerpoint presentation free to download id. The capital structure page of tvs motor company ltd. A companys capital structure points out how its assets are financed. Ppt the capital structure powerpoint presentation free. The debt capital in a companys capital structure refers to borrowed money that is at work in the business. Disneys capital structure remains heavily weighted toward using equity to finance growth, versus debt. Introduction the capital structure decision affects financial risk and, hence, the value of the company. As a rule of thumb, the higher the proportion of debt financing a company has, the higher its exposure to risk will be. This decision in a private enterprise is directed towards the achievement of maximization of the shareholders wealth or value of the firm. Capital structure is the mix between owners funds and borrowed funds. Ppt capital structure powerpoint presentation free to. The theory provides insight into a firms capital structure decision in a capital.
Tata consultancy services cash flow, tata consultancy. In theory, it may be possible to reduce capital structure to a financial calculation to get the most tax benefits by favoring debt, for example, or to boost earnings per. Project on capital structure authorstream presentation. Ppt capital structure theory powerpoint presentation. Restructuring financial model template download at cfi. Theories of capital structure ppt capital structure cost of capital. Rizzi amsterdam institute of finance october, 2014. Hi guys, i am sharing with you this excellent ebook on financial management in pdf format. Capital structure denotes to the amount of debt andor equity employed by an organization or business to invest its operations and backing its assets. Firms capital structure decisions and product market. When a company finances its operations by opening up or increasing capital to an investor preferred shares, common shares, or retained earnings, it avoids debt risk, thus reducing the potential that it will go bankrupt.
In millions 50 50 while the average cost of debt is fixed at 12%, the roidefmed as ebittotal assets may vary widely and is expected to be between 5% to 25%. The capital structure of the firm can have the following pattern. Financial management ebook,lecture notes,pdf download for. Introduction capital structure is the mix of financial instruments used to finance real investments by corporations. Financial management, ninth 2 debtequity mix and the value of the firm capital. A free powerpoint ppt presentation displayed as a flash slide show on. Capital structure is commonly known as the debttoequity ratio. Top 4 theories of capital structure learn accounting. Download project on capital structure file in pdf format. Capital structure ppt free download as powerpoint presentation. Capital structure of tata consultancy services printcopy to excel. Ppt capital structure theory powerpoint presentation free.
Chapter iii concepts and theories of capital structure and profitability. Capital structure is the interdependence of the companys longterm and shortterm debts or the mix of the companys equity and debt capital and the capability of the company to cope with them. Meaning of capital structure capital structure refer to the proportion between the various long term source of finance in the total capital of firm a financial manager choose that source of finance which include minimum risk as well as minimum cost of capital. Making capital structure support strategy mckinsey.
This sequoia capital pitch deck takes a page out of their book. A common way to express the capital structure is by using. Capital structure theory a free powerpoint ppt presentation displayed as a flash slide show on id. Capital structure is the mix of financial securities used to finance the firm. Capital structure denotes to the amount of debt andor equity employed by an organization or business to. Capital structure is the mix of ownersupplied capital equity, reserves, surplus and borrowed capital bonds, loans that a firm uses to finance business operations. This remains true even after the company more than doubled its debt load this year with. The value of an enterprise depends on expected earnings and cost of capital. A free powerpoint ppt presentation displayed as a flash slide show on powershow. Winner of the standing ovation award for best powerpoint templates from presentations magazine. Capital structure list of high impact articles ppts.
Mm assumed that investors and managers have the same information. This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Capital structure is the interdependence of the companys longterm and shortterm debts or the mix of the companys equity and debt capital and the capability of the company to cope with them evidently, every company can not develop without investments and credits, so businessmen borrow money in banks or use obligations and bonds and the debt of the. If you want to continue this discussion or have a follow up question, please post it on the network. Capital structure powerpoint templates, slides and graphics. The purpose of capital structure is to provide an overview of the level of the companys risk. Theyll give your presentations a professional, memorable appearance the kind of sophisticated look that todays audiences expect. Capital structure is the proportion of debt and equity capital used to finance its assets, capital expenditures, acquisitions, investments, and daily operation. This ebook is highly recommended for mba or management students.
Tvs motor company capital structure the economic times. The theory provides insight into a firms capital structure decision in a capital market free of taxes, transaction costs, and other frictions. Making capital structure support strategy the issue is more nuanced than some pundits suggest. For raising long term finances, a company can issue three types of securities viz. It is the employment of an asset source of finance for which. Chapter 14 capital structure and leverage leverage and risk optimal capital structure compare profit, return and risk for leverage and unleveraged firms a free powerpoint ppt presentation displayed as a flash slide show on id. In millions 100 0 equity debt capital structure b rs. Trade off theory assumes that firms have one optimal debt ratio and firm trade off the. Part i topics in chapter overview of capital structure effects business versus financial risk the impact of debt on returns capital.
Bharti airtel cash flow, bharti airtel financial statement. Download this template to create optimal capital structure curve for powerpoint presentations making an optimal capital structure curve was never easier, as the sample diagrams n this template can be edited right down to basic objects. Session outline capital structure planning approaches cost of capital approach ebit eps analysis roi roe analysis leverage analysis comparative. Capital structure ppt template is an academic presentation tool which shows the different allocation of capital. Capital structure is the proportion of all types of capital viz. Capital structure templates calculate and optimize. Theories of capital structure ppt free download as powerpoint presentation. The cost depends on the health of the companys balance sheeta triple aaa rated firm can borrow at extremely low rates vs. Optimal capital structure the optimal or the best capital structure implies the most economical and safe ratio between various types of securities. Reliance industries capital structure and theories of capital structure. Capital structure a reading prepared by pamela peterson drake outline 1.
Capital structure powerpoint template for presentation. Capital structure templates calculate and optimize company. Worlds best powerpoint templates crystalgraphics offers more powerpoint templates than anyone else in the world, with over 4 million to choose from. Jun 25, 2019 the debt capital in a companys capital structure refers to borrowed money that is at work in the business. Capital structure is also referred to as the degree of debts in the financing or capital of a business firm. An optimal capital structure exists that balances these costs and benefits. Oct 16, 2019 disneys capital structure remains heavily weighted toward using equity to finance growth, versus debt.
It is synonymously used as financial leverage or financing mix. Capital structure capitalization refers to the total amount of securities issued by a company while capital structure refers to the kinds of securities and the proportionate amounts that make up capitalization. Sequoia is one of the most wellknown venture capital firms in silicon valley. Capital structure ppt capital structure financial capital.
They specialize in incubation, seed stage, startup stage, early stage, and growth stage investments in private companies. Capital structure meaning the proportion of debt, preference and equity shares on a firms balance. When cost of capital is lowest and the value of the firm is greatest, we call it the optimum capital structure for the firms and at this point, the market price per share is maximised. According to ni approach a firm may increase the total value of the firm by lowering its cost of capital. Evidently, every company can not develop without investments and credits, so businessmen borrow money in banks or use obligations and bonds and the. Capital structure and its 4 important theories ni, noi. When the stock is traded and markets are viewed to be efficient, the objective is. The optimal capital structure of a firm is often defined as the proportion of debt and equity that results in the lowest weighted average cost of capital wacc wacc wacc is a firms weighted average cost of capital and represents its blended cost of capital including equity and debt.
Ppt c15 capital structure theory and policy kennedy soka. The capital structure theory helps us understand the. Many debates over whether an optimal capital structure exists are found in the financial literature. Ppt capital structure i powerpoint presentation free. It is that mix of debt and equity which maximizes the value of the company and minimizes the cost of capital. Use one of our capital structure templates to determine the optimal capital structure for your company and maximize its profitability. Aswath damodaran 3 the objective in decision making n in traditional corporate finance, the objective in decision making is to maximize the value of the firm. I will also share the lecture notes on this subject. A free powerpoint ppt presentation displayed as a flash slide show on id.
Ppt chapter 14 capital structure and leverage powerpoint. Theories of capital structure ppt capital structure. The rate used to discount earnings stream is the firms required rate of return or the cost of capital. Capital structure maturity value finance theory ii 15. Financial management ebook,lecture notes,pdf download for mba.
The funding mix particulars 200506 200607 200708 200809 200910 source of funds share holders funds share capital paid up 12448. Chapter 5 capital structure ppt download slideplayer. The value of a firm is defined to be the sum of the value of the firms debt and the firms equity. Thus, the capital structure decision can affect the value of the firm either. Debt comes in the form of bond issues or longterm notes payable, while equity is classified as common stock, preferred stock or retained earnings. The capital structure puzzle is unravelled and a clear.
The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Theories of capital structure ppt capital structure cost. Explain how beta is related to capital structure and the cost of capital. Lecture 5 capital structure i specifics of different sources of longterm financing common stock vs preferred stock vs debt the modigliani and miller model a free powerpoint ppt presentation displayed as a flash slide show on id. From a technical perspective, the capital structure is the careful balance between equity and debt that a business uses to finance its assets, daytoday operations, and future growth. Contingent convertible bonds and capital structure decisions. Capital structure ppt capital structure financial capital scribd. This is a financial system presentation powerpoint example. Optimal capital structure curve for powerpoint slidemodel. Capital structure of bharti airtel printcopy to excel. The theory of capital structure is closely related to the firms cost of capital. Cost of capital approach example the management of a firm believes that the cost of equity and debt for different proportions of equity and debt in the capital structure are as follows proportion of equity 1. This template is perfect for companies that are getting ready to develop a pitch when seeking investors. The goal of this chapter is to discuss the various theories that help to explain the determination of capital structure.