Usually the finance costs go up with the provision of a longer credit period to the debtors, but it also promotes sales. S.A. Talke’s debtor days are much higher than those of its competitor. This is due to Talke relying on two major customers. These two customers have extended credit terms and represent about half of the accounts receivables at the year end. Payable Days (Payables / COS X 365) S.A. Talke Basem Year 2011 2012 2013 2013 Payable days 141 95 165 58 Payable days helps to evaluate the company’s liquidity.
In general, Trade-Off Theory is another approach on gearing. In addition, this theory recognizes that target debt ratio varies from different organisation (Peake and Neale, 2009). However, the application of the shield tax applies to companies that are safe, with tangible assets, taxable income to shield must to have a peak target ratio. Furthermore, that does not have wealth maximization, and are high in risk resort to equity financing. However when expense are involved there are deferments in the optimum and when no expense is involved the target debt ratio is applicable (Brealy, Myers, Allen, 2011).
QP827 R Gross profit margin: GPM indicates the percentage of revenue available to cover operating and other expenditures. Higher gross profit margin indicate some combinations of higher product pricing and lower product costs. The ability to charge a higher price is constrained by competition, so gross profits are affected by competition. If a product has a competitive advantage ( superior branding, better quality, exclusive technology), the company is better able to charge more for it. On the other side, higher gross profit margin can also indicate that a company has a competitive advantage in product costs.
When there is high gearing, the profits available to shareholders are reduced due to interest paid on loans. The costs of the business can increase as well if the interest rates rise. However, high gearing is not necessarily bad. It can signify that the firm is seeking expansion plans, and have taken the chance to capitalise by borrowing at low rates. As for low gearing, more profits are distributed to shareholders due to lower interest bills.
Return on Equity increased from 10.98% to 15.39%, showing that the firm is more profitable than before. Earnings per Share increased as well, as there were less shares outstanding with the repurchase while net income was unaffected. EPS increased from $0.91 to $1.04, another indicator that the leverage increased profitability. With the repurchase, Blaine’s D/E ratio increased, going from not having any debt at all to a D/E ratio of 11.48%, which is more inline with industry competitors. PE ratio fell as a result of the leverage.
Wildasin (Journal of Public Economics) Here we have two complementary imperfectly mobile factors of production: labor and capital. A tax/subsidy will depress/rise the gross and net return to the other at all times after the beginning of the policy change: simultaneous dynamic adjustment. -) In the static setting, cross-effects increase if factors of production are complements or substitutes: favourable treatment for one factor increases the equilibrium employment of the other. -) For the dynamic model, thanks to the variational equations (“see Boadway 1979”) we observe that: i) An increase in the net tax burden on any mobile resource decreases its long-run equilibrium level ii) An increase in the net tax burden on a mobile resource reduces/increases the long-run equilibrium level of the other mobile factor if the two inputs are complements/substitutes in the production process iii) The long-run equilibrium depends only by production technology and not by adjustment costs. The incidence of the tax during the transition to a new steady state depends on whether factors are complements, substitutes, or independents in
The main findings are that the banks, who have raised funds when their market valuations were high, have lower current leverage ratio. This confirms Baker and Wurgler (2002) results that the historical market valuation has a large, negative and persistent impact on bank’s capital structure. The effect of past market valuation is stronger than the effect of current investment opportunities, which is measured by the market-to-book ratio. The results are inconsistent with the traditional capital structure theories, but provide support for the market timing
Problem statement This study aims to investigate the relationship between ownership structure and capital structure in an emerging market by using data relating to companies listed on the Main Board of Bursa Malaysia. 3. Research question This paper tries to provide an answer to the question below: a) Does dividend negatively relate to the leverage in Malaysia? b) Does profitability negatively relate to the leverage in Malaysia? c) Does liquidity positively relate to the leverage in Malaysia?
HDFC’s loan book is predominantly floating rates, whereas liabilities, especially deposits and NCDs are fixed rates. In normal economic conditions, the fixed rate liabilities are converted into floating rate denominated liabilities by way of interest rate swaps. HDFC monitors the money market conditions and enters into interest rate swaps at an appropriate time to minimise the interest rate
This is predicated on the assumption that Modigliani and Miller’s ideal world does not exist. Financial markets are not perfect given taxes, transaction costs, bankruptcy costs, agency costs, and uncertain inflation in the market place (Abor and Bokpin 2010). According to Bierman and Hass (1983), managers usually address the dividend payout level in the context of forecasting the firm’s sources and use of funds (Abor and Bokpin 2010). Considering future investment opportunities and the internal cash generation potential of the firm, both capital structure and dividend policy are chosen to secure that sufficient funds are available to undertake all profitable investments without handle new equity (Black, 1976). So, one of the most important constraints of investment decision in general and capital investment expenditures in particular is dividend policy.