Question

1. how to Relate company performance of the company financial theory: capital structure, capital cost, capital budget and Merge & acquisition

2. how to elaborate fundamental factor of the company

Answer 1

1.one can relate company performance to various financial theory like capital budgeting, when the company will be having adequate capital budgeting then the company will be able to maximize its profits and will be able to beat it's overall cost of capital through a high rate of return on the investment so adequate capital structure is very much important and there should be an optimum balance between equity capital and its debt capital in order to survive and sustain in the long run by maximizing profits.

Cost of capital should be kept at a lower levels and cost of debt should be utilised optimum in order to minimise the overall cost of capital by maximizing the rate of return and cost of capital should be lower than the rate of return on investment.

capital budgeting decision making is also important and company should be making a mix of net present value and internal rate of return and discounted payback period method and equivalent annual annuity method in order to determine various project and select the best project in order to maximize the overall rate of return.

the company should be doing mergers and acquisitions and other capital restructuring if it is finding that these capital restructuring is able to help these companies in order to maximize their overall return in the market and gain competitive edge in the overall market against the competitors, so it will be helpful in order to maximize the rate of return and market share of the company.

2. Fundamental factor of the company can be elaborated through determination of financial statement and various financial ratios of the company and it will be helpful in order to determine the financial fundamental of the company in the long run and fundamental of the company will be associated with finding out the valuation of the company because various types of valuers was will be trying to determine the fundamental in order to invest in the company in the long period of time so fundamentals of the company are based upon competitiveness of the company and survival of the company in the long run and balance sheet of the company as well as forward looking analysis of the company.