Introduction to journalism class notes table of contents. A major work is done by myself however few topics are copied from internet, whose sources i dont remember. Chapter 1 basic concepts of journalism ieitv network. Capital structure theories may be classified on the basis of relevance of capital structure to the valuation of a firm. Early communication systems in india news writers of mogul period, development of printing early efforts. Capital structure refers to the relative proportion of common stock, preferred stock and debt in a a companys total capital employed.
I am starting this thread to post notes of journalism. When a company finances its operations by opening up or increasing capital to an investor preferred shares, common shares, or retained earnings, it avoids debt risk, thus reducing the potential that it. Design of capital structure, theories and practices. Irrelevance theorem a benchmark striking result is that under fairly general conditions, the value of the firm defined as the sum of value of debt and. B net operating income noi approach contrary to the ni approach the noi approach suggests that the capital structure decision of a firm is an irrelevant factor to the valuation of a firm i. Capital structure factors influencing capital structure optimal capital structure dividend and dividend policy. Reason why capital structure is important hello peer employee, as indicated by kenton, the capital structure is how a firm funds its general tasks and development by utilizing various wellsprings of assets. These perspectives differ from the taxbankruptcy tradeoff. Capital structure capital structure is the proportion of debt, preference and equity capitals in the total financing of the firms assets. The theory of capital structure wiley online library.
It is the employment of an asset source of finance for which. Recent years have witnessed a change in the composition of capital flows to developing countries, and fdi and equity flows have been playing. Structured notes combine bonds and additional investments to offer the features of both debt assets and investment assets structured notes arent direct investments, but derivatives. Subject journalism and mass communication communication. The use of debt funds in capital structure increases the eps as the interest on debt is tax deductible, which leads to increase in share price. Solutions to capital structure practice questionsproblems, prepared by pamela petersondrake 2 5. This decision in a private enterprise is directed towards the achievement of maximization of the shareholders wealth or value of the firm. Capital structure is the mix of ownersupplied capital equity, reserves, surplus and borrowed capital bonds, loans that a firm uses to finance business.
Modigliani and miller proposition i without taxes the value of the firm is unaffected by its choice of capital structure under perfect capital markets. Lecture 12 capital structure capital structure theory capital structure. A journalist gets an assignment, reports out the story, over days or even months, and then sits down to the process of writingstruggling over the lede, debating how to structure the piece, and then crafting the most impactful, poignant story possible. Thin capitalization rules and multinational firm capital structure. Bahadur institute of management sciences, university of mysore, india available online at. Keywords economics, financial journalism, journalism, news media, onlinedigital journalism. Theoretical considerations a firm could use three methods to determine its capital structure.
It combines the features of multiple different financial products into one. To evaluate the interrelationship between capital structure and performance to determine the determinants of a capital structure 5. Capital structure theory asks what is the optimal composition between debt and equity. Introduction to journalism student activities book by dianne smith publisher. Meaning, classification sources available for dividends dividend policy general, determinants of dividend policy. The capital structure theories explore the relationship between your companys use of debt and equity financing and the value of the firm. The main objective of financial management is to maximize the value of the equity shares of the firm. The theory and practice of corporate capital structure january 2006 2 liability strategies group executive summary this paper discusses the theory and practice of corporate capital structure, drawing on results from a recent survey. Capital structure detailed notes financial management unit 3 1. They mm pointed the direction that such theories must take by showing under what conditions capital structure is irrelevant. The value of an enterprise depends on expected earnings and cost of capital. Theories of capital structure explained with examples. View capital structure research papers on academia. Optimum capital structure and cost of capital n if the cash flows to the firm are held constant, and the cost of capital is.
The capital structure decision aswath damodaran stern school of business. Kandir, balcilar, and onal 2009 notes that managements first priority is to evaluate the various costs and benefits associated with the use of both debt and equity. Read theories like net income approach, net operating income approach, traditional approach and modiglianimiller approach. The capital structure decision is important to the firm, the optimum capital structure minimizes the firms overall cost of capital and maximizes the value of the firm. Capital structure theories introduction capital structure decision is a significant decision in financial management. A companys capital structure points out how its assets are financed. A practical framework for developing capital structure.
The modern theory of capital structure began with the celebrated paper of modigliani and miller 1958. The capital structure of the firm represents its investment and financing strategy. The firm should strive to reach the optimal capital structure and its total valuation through a judicious use of the both debt and equity in capital structure. Capital structure represents the proportions of capital from different sources. At the optimal capital structure, the overall cost of capital will be minimum and the value of the firm will be maximum. Capital structure is the composition of longterm liabilities, specific shortterm liabilities, like bank notes, common equity, and preferred equity, which make up the funds a business firm uses for its operations and growth. From a tactical perspective however, it influences everything from the firms risk profile, how easy. Use the free adobe acrobat reader to view this pdf file.
A net income ni approach durand presented the net income approach which suggested. The capital structure decision can affect the value of the firm either by changing the expected earnings or the cost of capital or both. In a simplified context, it is the proportion of financing from debt and from equity capital. While the focus of most beginning journalism courses will remain. According to this approach the wacc and total value of a firm are independent and are not. It cannot be restricted to anyone on account of colour, race, sex and other differences. Capital structure in 30 minutes a guide for directors and shareholders by travis w. Perfect capital markets no taxes, no transaction costs, no bankruptcy costs. It is sad to note, however, that many journalism graduates enter the job market, never having fully. Once those prerequisites are in place, it can begin to consider changing its capital structure in ways that support the broader strategy. Definitions, concept, types, news elements, news values,news sources, structure.
The debt capital in a companys capital structure refers to borrowed money that is at work in the business. Hypotheses the following hypothesis is formulated for the study h 0. Capital structure, as its name itself signifies, is the composition of the capital employed by the firm from various sources of finance. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. Capitalstructure is a leading source for accurate, insightful firsttomarket news on and analysis of the european leveraged finance and distressed debt markets. During the depression period, the companys capital structure generally consists of debentures and loans. The objective of the firm should be directed towards the maximization of the value of the firm the capital structure, or average, decision should be examined from the point of view of its impact on the value of the firm. A company cant develop its capital structure without understanding its future revenues and investment requirements. The goal of this chapter is to discuss the various theories that help to explain the determination of capital structure. Introduction to journalism by dianne smith, published by teachingpoint as part of the expert systems for teachers series 2 8. The capital structure of a business firm is essentially the right side of its balance sheet. Capital structure theories help us to understand the relationship between the capital structure, cost of capital and value of a firm.
Notes to the financial statements and annual business reports, was conducted within the period from 2015 till 2018. It is normally expressed as a percentage of market value of each component of capital to the sum of. Obligation comes as bond issues or long haul notes payable, while value is delegated. The capital structure of a company refers to a containation of the longtermfinances used by the firm. The traditional school, at one extreme, argues that there is an optimum capital structure at which the value of the firm is highest. Capital structure and value of firm financial management. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext.
Harms, cfa, cpaabv executive summary capital structure decisions have longterm consequences for shareholders. Invention of printing press and paper a brief history of british and american journalism. Capital structure detailed notes financial management unit 3. Making capital structure support strategy mckinsey. A companys capital structure refers to how it finances its operations and growth with different sources of funds, such as bond issues, longterm notes payable, common stock, preferred stock, or. What are structured notes and how do they work smartasset. Capital structure theories the debate on optimal capital structure that leads to maximum market valuation and minimum cost of capital is perennial. Chapter iii concepts and theories of capital structure and profitability. Basic propositions, assumptions and restrictions of modiglianimiller hypothesis. More generally, can you add value on the rhs of the balance by following a good financial policy. A companys capital structure is arguably one of its most important choices.
A21 that it is important to maintain optimum levels of debt and equity in that capital structure, decision makers must constantly be in control of capital structure determinants. Capital structure a reading prepared by pamela peterson drake outline 1. While in period of boons and inflation, the companys capital should consist of share capital generally equity shares. The cost depends on the health of the companys balance sheeta triple aaa rated firm can borrow at extremely low rates vs. Capital market conditionin the lifetime of the company, the market price of the shares has got an important influence. Since then, many economists have followed the path they mapped. Various factors that influence the capital structure of a firm. Capital structure and cost of capital email memo 2 to. Financial journalism in todays highfrequency news and information. Capital structure is essentially concerned with how the firm decides to divide its cash flows into two broad components, a fixed component that is earmarked to meet the obligations toward debt capital and a residual component that belongs to equity shareholdersp. Brief notes on design of capital structure, theories and practices.
Complaints commissions pcc 2005 best practice note on financial journalism. Directors evaluate capital structure with an eye toward identifying the financing mix that minimizes the weighted average cost of capital. From a technical perspective, the capital structure is defined as the careful balance between equity and debt that a business uses to finance its assets, daytoday operations, and future growth. I am working on these noteses and will keep posting as they get prepared. Structured journalism offers readers a different kind of. Capital structure wharton finance university of pennsylvania. Crash course in journalism page 1 chapter 1 basic concepts of journalism the material contained in this book synthesizes what you need to learn to prepare for a successful career in mass communications. The capital structure puzzle is unravelled and a clear. Solutions to capital structure practice questionsproblems.
1105 1164 292 255 1426 1593 1324 1219 1584 1462 1286 415 1026 935 827 711 1345 785 937 607 1520 441 10 409 980 1136 1188 4 1279