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Capital structure with a minimum weighted-average cost of capital and thereby maximizes the value of the firm's stock, but it does not maximize earnings per share (Eps). Greater leverage maximizes EPS but also increases risk. Thus, the highest stock price is not reached by maximizing EPS. The optimal capital structure usually involves some debt, but not 100% debt. Ordinarily, some firms cannot identify this optimal point precisely, but they should attempt to find an optimal range for the capital structure. The required rate of return on equity capital (R) can be estimated in various ways, for example, by adding a percentage to the firm's long-term cost of debt.
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3 types of financing decisions under financial management?
The three types of financial management decisions are capital budgeting, capital structure, and working capital.In Some case Dividend decision is also part of financial management part although dividend decision comes under capital structure
What are the three types of financial management decision and what question are the designed to answer?
The three types of financial management decisions include capital structure, capital budgeting and working capital. They are designed to answer the main source of capital used to run the firm.
What are the three types of financial management decisions and what questions are they designed to answer?
The three types of financial management decisions include capital structure, capital budgeting and working capital. They are designed to answer the main source of capital used to run the firm.
Could you Evaluate the importance of capital structure and the cost of capital in efficient financial management of companies?
How do i start answering this question?
What are the factors affecting capital structure in financial management?
1. Business Risk 2. Financial Flexibility 3. Managerial Attitude 4. Tax Position
How is the optimum mix of capital structure achieved by a finance manager?
goudhmarini
Difference between Capital Structure and Financial Structure?
Capital Structure vs Financial Structure• Capital structure of a company is long term financing which includes long term debt, common stock and preferred stock and retained earnings.• Financial structure on the other hands also includes short term debt and accounts payable.• Capital structure is thus a subset of financial structure of a company.
Is there Relation between financial management and other functional areas?
Discuss capital structure theories and the appropriate theory for your organization if any
Difference between capitalization and capital structure?
Capital Structure vs Financial Structure• Capital structure of a company is long term financing which includes long term debt, common stock and preferred stock and retained earnings.• Financial structure on the other hands also includes short term debt and Accounts Payable.• Capital structure is thus a subset of financial structure of a company.
What does a financial executive devote the most time to?
Working capital management decisions.
Significance of cost of capital in financial decision making?
capital budgeting decisions capital structure decisions
Why different sources of finance is needed for capital expenditure?
Different sources of capital has different percentage of interest amount payable so optimum capital mixture required to finance business.Due to high risk and high interest rate associated with different source of financing so optimum capital structure is required to get maximum benefit.
