Chap. 13 - Capital Structure Decisions Business Risk - uncertainty inherent in return on assets (ROA)
- Demand Variability
- Sales Price Variability
- Input Cost Variability
- Ability of adjust output prices
- Ability to develop new products
- Extent to which costs are fixed: operating leverage
Operating Leverage (Business Risk) - Slides (2-6) Financial Leverage (Financial Risk) - Slides (7-9) Capital Structure Theory (WACC) - Slides ([18], [21])
- Effect of Taxes
- Effect of Bankruptcy Costs
- Trade Off Theory
- Signaling Theory
- Using Debt to Constrain Managers
Setting the Target Capital Structure - Slides (44-45) |