Chapter 13 - Chapter 13 Leverage and Capital Structure...

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05/07/09 Chapter 13: Leverage and Capital Structure 1 Chapter 13 Leverage and Capital Structure Concept of Capital Structure Effects of Financial Leverage Capital Structure Theories Irrelevance Relevance Observed Capital Structures Bankruptcy
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05/07/09 Chapter 13: Leverage and Capital Structure 2 Concept of Capital Structure How much debt should a firm use? Advantages and disadvantages of debt
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05/07/09 Chapter 13: Leverage and Capital Structure 3 Effects of Financial Leverage Operating/business leverage defined Risk of business assets How EBIT varies with revenue changes
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05/07/09 Chapter 13: Leverage and Capital Structure 4 Effects of Financial Leverage Financial leverage defined Risk of debt How NI varies with EBIT changes EBIT versus EPS ROA versus ROE
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05/07/09 Chapter 13: Leverage and Capital Structure 5 Capital Structure Theories Irrelevance theory MM proposition 1: value of firm is independent of capital structure Assumptions “Pie” concept Homemade leverage
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This note was uploaded on 05/07/2008 for the course BCOR 2200 taught by Professor Tomnelson during the Spring '08 term at Colorado.

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Chapter 13 - Chapter 13 Leverage and Capital Structure...

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