Question

Analyse the ANZ company's capital structure. How would you describe the current capital structure for your company and justify with reasons that should potential investors view this company as a favourable investment choice?

Answer 1

Australia and New Zealand banking company's capital structure has been highly inclined towards that capital and when we will be looking at the overall capital structure of the company then it would be comprising with 78% of the debt and only 22% of the equity capital and when we will be looking at the debt to equity ratio then it is also very high for a company so this company has a risk related to solvency due to higher amount of debt capital presence in its overall capital structure.

Capital structure of my company should be focusing with the adequate proportion of both equity capital and debt capital because equity capital and debt capital will be providing the required balance and when the company will be able to manage with a higher return on income then it can prefer debt capital because it will be helping the company in order to grow and when the company will be trying to retain the control in its own hands then it will be prefering a higher amount of equity capital so there should be an optimal capital structure which will focus upon the adequate proportion of equity and debt and its capital should be selected after balancing between the benefits associated with interest tax shield advantage and cost related to financial distress so there would be a proper apportionment between debt capital and equity capital in total capital structure which will maximize the benefits of the shareholders by maximizing the earnings.