Capital Market Pressures toward the Optimal Capital Structure

Trust our experienced homework helpers for quick assistance and original solutions.

  • Budget friendly
  • On-time delivery
  • Money-back guarantee

Discover Your Price

Regular price: $11.00

Your Price: $10.00 βœ”οΈ

Estimated pricing, subject to change based on specific needs

Our Expert Homework Writers

Hire experienced homework helpers to solve all your homework worries.

Amina Kamau (πŸ‡°πŸ‡ͺ)

M.S in Clinical Psychology

Academic WritingPsychology
β˜†β˜†β˜†β˜†β˜†

βœ… 3371 Completed Projects
⭐️ 1348 Student Reviews

Wei Liang (πŸ‡ΈπŸ‡¬)

Masters in Applied Economics

EconomicsEconometrics
β˜†β˜†β˜†β˜†β˜†

βœ… 345 Completed Projects
⭐️ 102 Student Reviews

Samir Hussein (πŸ‡ͺπŸ‡¬)

Masters in Financial Management

AccountingTaxation
β˜†β˜†β˜†β˜†β˜†

βœ… 284 Completed Projects
⭐️ 155 Student Reviews

Maya Thompson (πŸ‡¦πŸ‡¬)

Bachelors in English Literature

ArtHistory
β˜†β˜†β˜†β˜†β˜†

βœ… 729 Completed Projects
⭐️ 234 Student Reviews

Determining the optimal structure of capital is a difficult task. Simply copying existing or similar structures is a devastating idea. Findings suggest that companies are generally rigid to counter market fluctuations even though the changes have adversely affected their debt to equity ratio. You and your competitor may have a varying debt to equity year on year. This situation has led to an irresolvable debate regarding its meaning and implications:

  1. 1)Whether, the costs of the transaction are high enough to force managers to change the capital structure.(If the argument holds true the best way is to negate paying or repurchasing cost).
  • Is the best capital structure self-restructuring with the current market prices? (If so, firms would not change the capital structures at all as the best structure is self-adjusting).
  • Are companies making flaws by failing not to maximize their capital structures? (If not false, then copying is definitely a bad decision).

Let us dig deeper into the third situation where your conclusion would hang on the fact that you can control the market. If you think that an outsider can profit by mending a bad structure of capital, then you will also assume that the present structures are nearly optimized.

Unfortunately, nothing can be farther from the truth. To counter an incorrect financial decision one will have to stage a takeover. Any acquisition requires premium over the current price (up to 30% in some cases) plus fees to investment banker facilitating the process. To takeover, such a huge premium mending an incorrect structure of capital must create real benefits. Justifiable estimates for the increase in value while moving to the best capital structure varies from 1% to 3% pa.

Even after many years of capitalization, the value reaches up to the ceiling of 30% to the maximum.

Then the question arises whether the inability of outsiders to rectify and mend capital structures makes them dispensable? No. The inside management does not have to pay a control premium. Hence they face a different scenario. For them, 1-3 percent premium is a moderate amount which is also risk-free. For huge companies like IBM, the value generated is to only cover for the consultation fees! To sum up, though shareholders have limited or no effect on internal managers still they should try to make it right.

Coming back to the central question, whether we can copy existing capital structures for optimal performance. There are numerous reasons against copying.

The capital structure of the comparable may consist of both good and bad financing which only the respective manager can fix. So it is not necessary that it is an optimal structure reflecting the present market scenario.

Also, the managers’ motives are driven differently from the shareholders. They like uninhibited cash flows, flexibility towards decision making and absolute control. So it is your choice whether to increase the valuation of the firm or provide more comfort to the managers.

Comparable capital structures on closer introspection may reveal that they are not comparable at all.

Also maybe being different is what adds value to your firm. As an example, if all your competition is in debt you might predict that a recession will blow away all your competition. (Lowering the debt/capital ratio is an option, not an obligation, but there are places in the world where the option can be immensely successful).

In a nutshell capital structure and control is not determined with pin point precision, unlike stock markets. So a manager cannot depend on a self-restructuring capital structure dependent on market forces. Knowledge about comparable managers is good and can be helpful.

Capital Market Pressures toward the Optimal Capital Structure 7

 

Links of Previous Main Topic:-

Links of Next Financial Accounting Topics:-

Get Homework Help In



Maths and Statistics

ξ€Š

Science



Humanities & Arts

l

Essay Writing

get accurate homework help

Say Goodbye To Homework Stress.

Hear It from Your Peers

πŸ›‘οΈAuthentic, βœ… Verified Reviews

How Our Homework Service Works

FAQ number 1

Share your requirements

FAQ number 2

Make secure payment

FAQ number 3

Get homework answers

FAQ - Frequently Asked Questions

Discover quick answers in our FAQ, covering the most common customer questions about our homework help service.

Is your homework service confidential?

M
L

Absolutely! Confidentiality is one of the basic guarantees of our service at MyHomeworkHelp.com.

When our customers make their homework orders, they know their information remains 100% confidential.

Even your homework writer will not be provided with your personal details. So, when you hire a professional homework helper on our website, rest assured that your information will remain private and safe.

For a comprehensive understanding of how we protect your privacy, please refer to our Privacy Policy.

Who will help me with my homework?

M
L

We work with subject experts from all over the world. We hire them with the help of complex tests in the disciplines of their expertise. We also verify the IDs and academic transcripts of our homework writers to be sure that our experts have a bachelor's or master’s or a PhD degree. This is how we can be sure of the proficiency of our panel of experts who will help you with your homework.

Is it legal to ask for help with homework?

M
L

Seeking homework help is perfectly fine and shows your proactive approach to overcoming challenges. But it's important to use our homework service to enhance your understanding, not to replace your own efforts.

Our homework service offers original solutions for personal use, including:

  • Generating ideas or arguments for your research.
  • Deepening your subject comprehension.
  • Direct citation, with proper referencing.

However, it's crucial to avoid plagiarism by not submitting our work as your own. Make sure to check your institution's academic integrity policies before using our services. Our goal is to support your educational journey in a responsible and beneficial way. Refer our honor code for more details.

Is myhomeworkhelp.com legit?

M
L

Yes, myhomeworkhelp.com is completely legitimate. We've been successfully connecting students with top experts worldwide since 2012, offering direct, secure communication for a seamless learning experience. With over thousands of students helped and a commitment to innovative, effective education tools, we're dedicated to making learning easier and more accessible for everyone.

You can read our reviews here on Trustpilot and Sitejabber (Independent, verified reviews from buying customers) like you!

Is there a possibility of plagiarism in my completed order?

M
L

Unlike our competitors who use cheap and ineffective in -house plagiarism software, MyHomeworkHelp.com uses credible software to check your homework solution originality. We guarantee that your paper will pass TurnItIn checks with a low percentage of similarity. In addition, we also check submitted papers for ai-content using Originality.ai.

You will receive a complemantary plagiarism free report with your completed order.

What makes you one of the best homework help website?

M
L

We are not number 1 (yet!). We're an independent, bootstrapped business standing up to Big EdTech for last 12 years. So it means a lot that folks like you are willing to consider our services for your educational needs.

Myhomework Help is recognized as one of the premier websites for homework answers for three key reasons.

  1. Firstly, we pride ourselves on the expertise and qualifications of our tutors/experts, who are selected through a rigorous vetting process to ensure they can provide best academic assistance across a wide range of subjects.
  2. Secondly, our response time to student inquiries is fast (as early as few minutes), reflecting our understanding of the importance of timely support in an academic setting.
  3. Lastly, we keep our pricing very student friendly. Our aim is to provide the best learning experience to students like yourself without burning a hole in your pockets.

MyHomeworkHelp: Best Homework Help Features

Original Solutions

Entrust your homework to us for A-grade, plagiarism-free solutions. Our experts tailor each task from scratch, ensuring 100% originality while following your instructions at all times.

Security & Anonymity

We rigorously safeguard your privacy, employing secure gateways for transactions. Your personal details remain undisclosed to everyone, including your homework tutor.

Unlimited Revisions

Your satisfaction is our priority. If the delivered work doesn’t meet your standards, request as many revisions as you need – until you’re completely content with the final result.

24/7 Customer Support

Got questions on existing order or need a hand placing a new order? Our support team is ready to assist you anytime, ensuring you receive timely help and friendly service.

What's included

Best assignment help

Turnitin report

$19.99  FREE

Best assignment help

Unlimited revisions

$9.99  FREE

Best assignment help

Formatting

$6.99  FREE

Best assignment help

Citations & References

$7.99  FREE

Get all benefits for FREE