Question

In: Finance

Describe how the following three subjects are interrelated: (give an example) a. Capital structure  b. Leverage   c. Risk  

Describe how the following three subjects are interrelated: (give an example) a. Capital structure  b. Leverage   c. Risk  

Solutions

Expert Solution

Capital structure is combination of various types of capital which will be forming out the overall capital of the company. capital structure is a combination of debt capital and equity capital and preference share capital in the overall capital structure of the company and leverage is included in the overall capital structure of the company whereas whenever we are including more leverage in the overall capital structure it would be meaning that there would be higher risk associated with the solvency of the company in the long run.

Risk arise out of inclusion of debt capital and leverage in the overall capital structure of the company and there will always be a proactive decision making in order to include a certain part of debt capital which will provide the company with the overall efficient capital structure and there will be a trading off between the risk associated with the debt capital and benefit associated with debt capital.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Describe how the following three subjects are interrelated: (give an example) a. Capital structure  b. Leverage   c. Risk  
Describe how the following three subjects are interrelated: (give an example) a. Capital structure  b. Leverage   c. Risk  
Should A-REITs have high leverage, or low leverage? Describe the optimal capital structure for a generic...
Should A-REITs have high leverage, or low leverage? Describe the optimal capital structure for a generic Australian Real Estate Investment Trust (A-REIT). How does your answer change if the A-REIT is a stapled security? Please include discussion of target leverage, maturity, debt security and the influence of common debt covenants.
Describe, explain, and give an appropriate example of the three sources of capital in new venture...
Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank).
Describe, explain, and give an appropriate example of the three sources of capital in new venture...
Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank).
Describe, explain, and give an appropriate example of the three sources of capital in new venture...
Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank).
Describe, explain, and give an appropriate example of the three sources of capital in new venture...
Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank)
Describe, explain, and give an appropriate example of the three sources of capital in new venture...
Describe, explain, and give an appropriate example of the three sources of capital in new venture creation. (source of capital-exp: personal, friends and relatives, venture capitalists and bank).
How does a firm “leverage” its capital structure? When is leverage advantageous? When is it disadvantageous?...
How does a firm “leverage” its capital structure? When is leverage advantageous? When is it disadvantageous? Who receives the advantage or bears the disadvantage of leverage? Describe how recent rule changes will require leases to be accounted for beginning in 2019. How do the old lease accounting rules differ from the new lease accounting rules? How do the new lease accounting rules impact leverage?
How does a firm “leverage” its capital structure? When is leverage advantageous? When is it disadvantageous?...
How does a firm “leverage” its capital structure? When is leverage advantageous? When is it disadvantageous? Who receives the advantage or bears the disadvantage of leverage? Describe how recent rule changes will require leases to be accounted for beginning in 2019. How do the old lease accounting rules differ from the new lease accounting rules? How do the new lease accounting rules impact leverage?
Give an example of a capital budgeting decision, capital structure decision, and a working capital management...
Give an example of a capital budgeting decision, capital structure decision, and a working capital management decision.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT