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Essay / Research Paper Abstract
This 5 page paper looks at some issues seen in financial management. The paper discusses sources of capital and the impact of sources on capital structure, market efficiency and agency theory. The bibliography cites 7 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEfinmanissue.rtf
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Unformatted sample text from the term paper:
source of capital to the influence of agency theory. By looking at some of these subjects a management team may be better equipped to deal with financial management issues.
When looking at sources of capital it will come from one of two sources, it will either be equity, this is the shareholders
funds and money that the company owns, or it will be debt, wither though loans or possibly with the use of preference shares which are usually recoded in the debt
figures. The proportion of debt to equity is known as the debt equity ratio. The way this is calculated is the long term
debt, which in this case will usually include any preferences shares that have been issued, which is then expressed as a percentage of the total equity. This gives us an
indication of the approach of the company and also the debt burden. Where there are higher ratios it is usually expected by the shareholders that there will be higher returns
to justify the higher borrowing (Elliott and Elliott, 2007). This means that firms with higher debt or gearing may be expected to have a higher cost of capital.
Borrowing usually occurs in order to enrich a company and take advantage of opportunities to create more value for shareholders. However, highly geared companies;
companies with a high debt equity ratio may also be seen as more risky investments as less of the company is owned by the shareholders. The attitude towards gearing
and risk was seen in October 2008 with the UK telephone directory company Yell, the firm was highly geared and it took a rescheduling of the debt so that repayments
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