Capital structure policy is a trade-off between risk and return: · Using debt raises the risk borne by stock holders · Using more debt generally leads to a higher expected rate on equity. There are four primary factors influence capital structure decisions: · Business risk, or the riskiness inherent in the firm’s operations, if it uses no debt. The greater the firm’s business risk, the lower its optimal debt ratio. · The firm’s tax position. A major reason for using debt is that interest is tax deductible, which lowers the effective cost of debt.
followed by another in July 2005 for Rs.50 crs.. Government of India is the major shareholder and enjoys over 66 per cent stake, while institutions and individuals hold around 18 per cent and 13 per cent respectively. In 2006, the bank floated a BPO company named “Syndbank Services Ltd'' as a wholly owned subsidiary. It distributes third party products such as life and non-life insurance policies. Other services include online railway ticket booking, utility bill payments and excise & service tax payments through internet.
They have three divisions within the company: FedEx Express, Ground, Freight and Services. Owners The company is owned by a multitude of institutional holders including Primecap Management Company (6.4%), Dodge & Cox Inc. (5.15%) and Mutual Fund Holders such as Vanguard/Primecap Fund (4.05%), and Dodge & Cox Stock Fund (3.10%). A major shareholder and Insider/owner is Smith Frederick W with $15 Million worth shares. [Brackets indicate ownership of Company] Sales $44 Billion EBITDA 4.923 Billion (Operating Income of 2.56 Billion and a net Income of 1.56 Billion) Leverage Deutsche Post DHL (Listed under Xetra) Main Idea about company In specificity to DHL operating in USA, DHL services include international express deliveries, mail services, freight services via air, sea, road and rail and warehousing solutions such as packaging, repairs, storage. It also provides other customized logistic services.
Sometimes, it happens that higher debt leads the firm to gain higher debt as cost of debt is lower than the cost of equity but it is not good for the firm to always apply this technique because if the firm fails to meet up the obligations of debts ten the firm can reach even in the stage of the bankruptcy. So, the firms should be much analytical and attentive when to take higher debts. Higher debt can lead to both higher gain and risk, so firms should be very careful while taking financial leverage. Formula: Total Debt / Shareholder’s Equity Global India(Rs) Pakistan(Rs) Sri Lanka(Rs) Year 2013 2012 2011 2013 2012 2013 2012 2013 2012 Total Debt 14690 18120 14319 11894.9 10501.9 25653.243 25246.024 Shareholders Equity 62575 61007 56797 23687.5 17984.1 11859.157 11560.264 4215.658
Bankruptcy Cost: The debt brings with it future cash flow commitment in the form principle borrowed and periodic interest which increases the potential risk of firms default and bankruptcy. (Ebaid, 2009). Modgliani and Miller in their analysis had proved that firm can lower their cost of capital by increment of leverage in their capital structure. However considerable use of debt financing would expose business to high probabilities of default (Khan and Jain, 2005).Not only this, the firms will also find it demanding to meet the promised principles and interest. Furthermore, the firm is likely to incur costs and suffer penalties if it is not able to pay the interest and principles on time.
Extreme volatility is one inherent risk of investing in emerging ... ... middle of paper ... ... also been worried about the emerging markets ability to cope with reduced liquidity, with emerging market equity funds suffering ’13 straight weeks of outflows’ (Steve Johnson, Jan 2014). Summary Emerging market hedge funds are still currently smaller in size compared to other types of hedge funds. There have been many recent opinions on the idea that emerging market hedge funds will receive greater investment based on the fact that other types of larger hedge funds have diluted their alpha by investing into too many assets. These larger hedge funds have also shown that they take larger bets on individual securities that ultimately means more risk for the fund. However, in any case, emerging market hedge fund performance is like any other hedge fund in terms of outlook – only time will tell on how big and prevalent they become in the overall hedge fund industry.
IOCL in comparison to its competitor i.e. HPCL has a better liquidity position except for the year 2008-09 where HPCL has a better position. The ideal current ratio of 1.5 has not been achieved by any of the company mainly because of the nature of the O&G industry .Current ratio also represents the margin of safety for creditors. There is need for the safety margin for the inevitable unevenness in the flow of funds through current asset and current liability account. The flow should be absolutely smooth and uniform each year so that the current assets are sufficiently large than the current liability so that the firm is able to pay its current maturing debt when it becomes due.
The thought of bringing the debt ratio back to 25% was brought on by the fact that the company saw that high levels of capital spending were vital to the success of the firm and that high debt levels may put them at higher risk for defaulting. The consistent high spending of capital equipment is the first reason why one would recommend reducing the debt to equity ratio. A company with higher levels of debt is less flexible in being able to adjust to new market demands and conditions that require the company to make new products or respond to competition. Looking at the pecking order of financing, issuing new shares to fund capital investing is the last resort and a company that has high levels of debt, must move to the equity side to avoid the risk of bankruptcy. Defaulting on loans occur when increased costs or bad economic conditions lead the firm to have lower net income than the payments on loans.
This is particularly true when the amount of external financing involved is fairly small, for flotation costs are inversely related to the size of the issue and tend to rise rapidly as the size of an issue declines.  CONCLUSION From the article, we can conclude that there are a lot of factors that affecting dividend decisions. First of all is the factor of profitability. Company will consider about the extent of profits in making a dividend decisions. In addition, the profitability is also influences the opportunities to the company for future investments.
Very often the markets are sensitive to many variables for example of most efficient managers with a SAT score above 1420, however according to “Chevalier and Ellison's manager characteristics model can explain only about 5% of the total variation in mutual fund returns” (James L. Davis), because the style-adjusted passive benchmark model has proved to be more efficient in work of the average mutual fund than the active one (James L. Davis). Performance persistence. The bulk information is provided in prices and most management efforts just can’t overplay the market. In fact the more efficient the market is the less is the need for the market expert services at all. What is the model?