Submitted by: Submitted by BrittneyHirschau
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Category: Business and Industry
Date Submitted: 06/29/2011 08:25 PM
Final Project
MT 217-03
Reflect and describe which key concepts and topics in this course have made you a stronger candidate to enter the business world.
The main key topics in the course which made me a stronger candidate to enter the business world with great confidence are capital structure, leverage effect, dividend policy formulation as well as dividend calculation.
Knowledge of the Capital structure concept helped me to understand how the company or its managers decide what proportion has to be created in various resources/securities. Or in other words how the company finances its assets by way of debt(loans, binds, debentures) or equity or other sources of finance(trade credit, loan from financial institution, subsidy etc.). The optimum or balanced capital structure means an ideal combination of borrowed and owned capital that may attain the marginal goal, i.e. maximizing of market value per share or minimization of cost of capital. A right capital structure defines the strength of the organization.
The use of fixed-charge sources of funds, such as debt and preference capital along with the owners’ capital structure, is described as financial leverage or gearing or trading on equity. The financial leverage employed by a company is intended to earn more return on the fixed-charge funds than their costs. The surplus or deficit will increase or decrease the return on the owner’s equity. Business risk is the risk associated with the company specifically, which might affect the company’s share price, workings, and decisions.
Levered beta is the beta which shows less volatility as debt is considered in that and unlevered beta means the beta of the firm which has no debt i.e. only has owners fund, thus it is considered more volatile. In other words unlevered beta of the company is equal to the beta of company without debt. It shows the amount of risk associated with the company’s stock.
The term dividend refers to that part of profits of a firm which is...