Essay - Capital Structure and the Dividend Policies Introduction Analysis Investment in...

Capital structure and the dividend policies

Introduction

*****

Investment in firms

Miller-Modigliani Theorem

Impact of taxes

Impacts of bankruptcy

***** Signaling

Clientele effect

Conclusion

Bibliography

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The general principles for investment are applicable to every business and ********** may be outlined simply through saying the one should invest in projects that provide greater yields than the basic minimum acceptable rate. The rate is naturally to ***** dependent on the risk involved in the project. It should also reflect the basic financing mix used and this means the *****ture of the owners' funds or equity or capital ***** borrowed m*****ey or debt. The returns from ***** ***** will have to be measured through the cash flows generated as also the timing of the cash flows, and these cash flows can be either additive or depletive.

***** important part of financial management is to choose a correct fin*****ncial mix that gets a return as per the current cost ***** money and are ***** commensurate with the type of assets that the finance has been used *****. There may be situations when the *****ments are not being able to earn the correct rate, *****n there is no purpose in continuing with the business and it is better ***** return the ***** to the shareholders. The days ***** ***** individual entrepreneurs is almost fin*****hed and to day most of the organizations depend on the ***** based structure for establishment, development and growth. The return to ***** stockholders is ***** various *****ms, but the ***** important aspect is the dividend.

Analysis:

All stockholders in a ***** expect to e*****rn money from the business and this is given in the form of returns and these are dividends and stock buybacks. The method to be used depends on the preferences and types ***** ***** who have invested in ***** business. The main aim in any business is always to achieve the highest possible returns. One of ***** best ways of making money for the sh*****holders ***** ***** have a good *****mount of debt. This happens as the company ***** has only got to makes fixed payment for debt. *****se payments are composed of the repayment ***** the debt ***** the concerned interest. There is the greatest requirement ***** pay these in time, as if these are not paid, the stockholder ***** end up loos*****g ***** business. The origin of debt can be from ***** methods and ***** small private businesses comes from bank loans. For large organizations *****se shares are publicly traded, ***** ***** from bonds. It ***** be remem*****red that all interest bearing liabilities, both ***** the short term variety as well as the long term ***** are in ***** category of debt. (Corpo***** Finance: Lecture Note Packet 2)

***** ***** some benefits ***** using debt and the most important financial benefit is ***** tax benefit. ***** other benefit is the compulsory d*****cipline that it imposes on the management. Apart from the possibility of *****r*****tcy ***** has ***** discussed, ***** are direct *****s ***** debt in