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Capital structure case studies
Capital structure case studies
How to evaluate capital structure
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CAPITAL STRUCTURE Analyzing primary factors that influence a company?s capital structure Dora I. Gonzalez Devry University What is the name of the company? What is the industry sector? Name of the company is Tyco International Plc, who recently merged with Johnson Controls International Plc, in order to bring together the best-in-class product, technology and service capabilities across controls, fire, security, HVAC, power solutions and energy storage. They serve various ends markets including commercial buildings, large institutions, real, industrial, and small business and residential. Tyco International is a manufacturing and industrial services corporation What are the operating risks of the company? By definition, …show more content…
This ratio is calculated by dividing (short-term debt plus long-term debt) by (short-term debt plus long term-debt plus shareholder?s equity). Based on data shown in page 70 of their 2015 Financials. Total long term-debt = $2,159 million Total Equity = $4,076 million Financial risk = $2,159 / ($2,159+4,076) million = 34.63% 34.63% of Tyco International Plc?s capital structure consists of debt. 4. Does the company have any preferred stock? Based on the Consolidated Statements of Shareholder?s Equity, year ended September 2015, in page 71, as shown in the statement, there are no preferred stocks. 5. What is the capital structure of the company: short-term portion of long-term debt, long-term debt, preferred stock (if any), and market value of common stock issued and outstanding? To compute for the market value of Tyco?s common stock issued and outstanding, I used the following data: Number of Tyco outstanding shares = 422,755,899 Stock Price as of November 6,2015 = $37.02 Total market value = $15,650,423,381 The information below summarizes the information presented in the balance sheet: 6. What is the company?s current actual
Suppliers are mostly concerned with a company 's ability to pay on their liabilities. Therefore, the current ratio and the quick ratio are both looked at by suppliers. The current ratio takes a company’s current assets and divides that by the company’s current liabilities. This number is
The company I have chosen to research for my final paper is Home Depot. Home Depot’s principal assets, debt and stock information as of January 30, 2001 are as follows: (amounts in millions, except stock)
ANNUAL DIVIDEND: $0.19 - $99 - $ MARKET CAP: $60.12B. PRICE TO EARININGS: $27.37. TRAILING 12 MOS. PRICE TO EARNINGS: $19.73. FORWARD 12 MOS. FULL YEAR ENDED 04/25/ 2004 2005
Myers, S.C. 2001, "Capital Structure", The Journal of Economic Perspectives, vol. 15, no. 2, pp. 81-102.
The financial health of a publicly traded company is used by potential investors looking to add value and profit to his or her portfolio. One may obtain this data from many different sources such as those used in this paper. The Securities and Exchange Commission, SEC, was founded to help protect investors by requiring by law publicly traded companies provide credible and relevant financial data for the public to access. There are also many online sites such as YahooFinance.com that anyone with access to the internet can use to research companies. Access to this financial data is the easy part, interpreting it is another matter. There are numerous ways to compile this data such as the common-size analysis (hor...
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
A consolidated financial statement can be defined as the financial statements of a parent and its subsidiaries combined to form a single economic entity (AASB 10, 2011). The entity, which acquires the other entity, is known as the parent and the entity, which has been acquired, is known as the subsidiary. Consolidation financial reports arise when one entity purchases another entity, to then form a group.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
Capital structure theory studies firm’s financing structure and the factors influencing capital structure. Bulk literature focus on trade-off and pecking order theory to explain firm’s debt financing decisions. These studies have already identified certain key determinants of capital structure, such as firm size, growth opportunity, profitability and tangible assets, etc. Other than these common determinants, agency theory as proposed by Jensen & Meckling (1976) argues that, agency cost arising from the conflicts of interests between managers and shareholders also influence firm’s capital structure. Regarding to the well research of other two capital structure theories, this study mainly focus on agency theory and try to find out agency costs related determinants which influence firm’s capital structure decisions.
Their company is featured in the Fortune Global 500 list of ‘World’s Largest Corporations’ for the ftheirth consecutive year and is among the Top 25 climbers for two years in a row. They are ranked 182nd in the FT Global 500 (up from previous year’s 284th rank). Further, their company ranks amongst the ‘Worlds 25 Most Innovative
With this information you can also see the following is a chart of the last two years of the stock for the same company:
5. Harry Davis’s target capital structure is 30% long term debt, 10% preferred stock, and 60% common equity.
Tyco International was founded in 1960 and was regarded as an important electrical and electronic components provider, fire protection system maker and electronic security service provider. It is a diverse producing and serving corporation. Tyco has done business in over 1000 locations in 50 countries and hires 69,000 employees around the world (TYCO, 2012). Tyco International has expanded rapidly and broadly since its IPO in 1973 and has numerous companies among the Fortune 500. The firm’s revenue increased from $3.1 billion in 1992 to over $40 billion in 2004, with the firm’s market value estimated at over $100 billion (TYCO, 2012). Tyco has made numerous acquisitions, including 40 acquisitions since the 1980s.
Managing an organization’s financial operation requires a good understanding of the economy and ways to maximize revenue. For an organization to operate on a daily basis, adequate cash flow is required. Poor cash management within an organization might make it hard for the organization to function because there may be shortage of cash in case of inconsistences in the market. In most companies, management is interested in the company 's cash inflows and outflows because these determines the availability of cash necessary to pay its financial obligations. Management also uses this information to determine problems with company’s liquidity, a project’s rate of return or value and the timeliness of cash flows into and out of projects (used as inputs