Financial Management

Financial Management (BFN 203)|
majuscule Structure|
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Contents
Introduction2
unlike Theories of Capital Structure2
Traditional possibility3
Limitation of traditionalistic theory4
Modigliani and Miller Approach5
Assumption of M & adenosine monophosphate; M theory5
Proposition of M & M theory5
Justification of M & M theory6
Limitations of M&M Theory7
Advice to Mr. Pang8
close9
Reference10

Introduction
Capital Structure of the firm great deal be defined as the combination of long-term finances utilise by the firm. Theories of crown expression atomic number 18 closely relate to that of the cost of expectant. The main goal of all the decisions taken regarding capital social organization or financial leverage is to maximize the shareholders wealth. The twain propositions needed to consider for designing capital coordinate are:
(i) Maximization of wealth has been achieved.
(ii) Best approximation to the optimal capital structure.

Factors Determining Capital Structure
* Minimization of Risk:
* Capital structure must be consistent with business risk.
* It should result in a certain level of financial risk.
* Control: Capital structure of the firm should be managed in such a way that minimum risk is involved
* Flexibility: The capital structure should meet the changing scenario of business situations.




* Profitability: The capital structure must be profitable from the point of view of law shareholder.
* Solvency: The capital structure should be such that it does not affix the risk of firm being insolvent. Excessive use of debt can threaten solvency of firm

Different Theories of Capital Structure
* loot Income (NI) approach
* Net Operating Income (NOI) Approach
* Traditional Approach
* Modigliani-Miller Model
* Without taxes
* With taxes.
Equity and debt capital are considered the deuce major sources of financing a company. Capital structure gives suggestions virtually the proportion of debt and...If you want to get a full essay, graze it on our website: Orderessay



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