Capital Structure & Capital Structure (Article) and Planning & Budgeting

Capital Structure

Capital structure is a major topic in corporate financial management. The way a company finances itself over time becomes apparent by looking at their balance sheet. In the Pacioli Company assets of $299,000 were balanced by $231,000 of liabilities (77.3%) and $68,000 of equity (22.7%). So over time, Pacioli tends to finance itself borrowing 77% and 23% owner investment. What is the optimal mix? Start by reading Finkler Chapter 5.

Calculate the total liability to assets percentage and the total stockholder equity to total assets percentage (these must sum to 100%) as of December 30, 2006 for Stanley Works. Keep a copy of the Stanley Works 10-k and disclosures – we will use it in subsequent assignments.

Type your calculations in a Word document


Capital Structure (Article)

Traditional finance theory suggests that some debt financing should be used since interest payments are tax deductible (dividend payments to shareholders are not). However, going too far with debt increases the possibility of costly legal entanglements if the company misses (defaults) on an interest or principal payment. Finance theorists can derive optimal capital structure given assumptions about cost of debt financing, cost of equity financing, tax rates, and legal costs related to default risk. The optimal solution minimizes the overall cost of capital, and maximizes the value of the company.

Download the article, Making Capital Structure Support StrategyPreview the documentPreview the document. Read the first 3 pages (down to the heading A practical framework for developing capital structure). The authors discuss additional factors (beyond tax benefits of debt) that need to be considered in deciding on an optimal capital structure.

Write a summary of the article addressing the following points.

1. What is meant by financial flexibility and which financing source (debt or equity) provides financial flexibility.

2. What types of companies should consider greater use of debt financing?

3. What types of companies should focus more on use of equity financing?

Type your response in a Word document


Read Finkler, Chapter 6.

Do Question for Review #9 (flexible budget) assuming expected sales volume of 44,000 units. Use Excel Template #7 and Table 6-4 on page 61 of the text. Enter 44,000 in the middle column of your spreadsheet for units sold and the spreadsheet will then generate units sold if volume is 10% greater or less than expected. The sales price per unit is $4.125; in cell E20 enter =4.125*E18. Enter 0 for Service Contract revenue in cell E21.

For expenses, follow the assumption in Table 6-4 that all expenses are fixed, except for supplies. Cost per unit for supplies is $0.25 ; therefore enter =0.25*E18 in cell E26. For Salaries, Rent, and Other, you will enter the amounts from Table 6-4 in all three columns (by doing so, you will be over-writing formulas in the columns to the left and right of the middle column).

You should find that with 44,000 units profit is $16,500; a loss of $550 if sales fall 10% lower than expected (39,600 units); and a profit of $33,550 if sales exceed expectations by 10% (48,400).

Submit your spreadsheet online when you have completed the above steps.





Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.