Capital Structure Theory – Modigliani Miller Proposition

Capital Structure Decision in Corporate Finance

The corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analysis used to make these decisions. The discipline as a whole may be divided among long-term and short-term decisions and techniques with the primary goal being maximizing corporate value while managing the firm’s financial risks. Capital investment decisions are long-term choices that investment with equity or debt, and the short-term decisions deals with the balance of current assets and current liabilities which is managing cash, inventories, and short-term borrowing and lending. Corporate finance can be defined as the theory, process and techniques that corporations use to make the investing, financing and dividend decisions that ultimately contribute to maximizing corporate value. Thus, a corporation will first decide in which projects to invest, then it will figure out how to finance them, and finally, it will decide how much money, if any, to give back to the owners. All these three dimensions which are investing, financing and distributing dividends are interrelated and mutually dependent.

The capital structure decision is one of the most fundamental issues in corporate finance. The capital structure of a company refers to a combination of debt, preferred stock, and common stock of finance that it uses to fund its long-term financing. Equity and debt capital are the two major sources of long-term funds for a firm. The theory of capital structure is closely related to the firm’s cost of capital. As the enterprises to obtain funds need to pay some costs, the cost of capital in the investment activities is also the main consideration of rate of return.… Read the rest

Ethics in Financial Reporting

Integrity is of utmost importance for a successful career in business and finance in the long run. Some believe that the world of finance lacks ethical considerations. Whereas the truth is that such issues are prevalent in all areas of business.

The business environment in much of the world is reeling from the revelation of several financial scandals in the past few years. The optimism of the turn of the century has been replaced by scepticism and distrust. It will be discussed as to how we landed ourselves in this situation, what is being done to correct it, and what the future holds for us. Though Enron has been used as the poster-child for this purpose, breakdowns in accounting and corporate governance in Enron as well as in other companies will be discussed.

Some companies that have encountered financial reporting problems will be discussed along with the role of auditors (including Andersen’s role in Enron), the regulatory environment, some of the causes of the problems, and the current and possible future outcomes.

Ethics and Accounting

Ethics (maintaining fair and true statements) is a key part of financial reporting. For shareholders to trust a company with money, they must feel confident in the company’s financial reporting. Financial reporting presents all data relating to the entity’s current, historical and projected health meaning investors and shareholders rely upon the financial data available for making informed and educated decisions. To help entities comply with business regulations and maintain financial reporting, shareholders can trust the existing organizations designed to monitor different aspects of the accounting world.… Read the rest

Popularity of Master of Business Administration (MBA)

Higher education – the area a young individual decides to graduate/post-graduate in – is perhaps one of the most important choices a person makes during his/her lifetime. A choice at this juncture determines the course of one of the largest investments in terms of time, money and commitment a person could make. Such an important decision needs considerable thinking on the part of the individual. ‘Why do I want to do this educational programme?’ is a question that needs to be answered. At a later point in life, some individuals may feel repentance on his/her wrong choice of higher education at the degree/P.G. level. The ‘too-late’ realization with a feeling of disillusionment is a direct outcome of unconsidered early-life decisions relating to higher education and subsequent career/profession. When faced with the question of what to do in life, the result usually may fall into two categories: He/she may do what others want him/her to do or do what everybody around him/her seems to be doing. The compulsion to get into one field of study or another field of study usually comes from the individual’s parents or / and people around him/her. This may happen especially in the case of professional courses.

If we ask any MBA aspirant why he/she wants to do MBA, the answers may follow predictable lines. Usually, everyone wants to work in a multinational/national company and earn a fat salary, or is preparing for it since friends are into it. A few may actually know what to expect from the profession.… Read the rest

How to Ensure That a Business’s Finances Are Kept in Order

Do you struggle to keep your business’s financial affairs in order? It’s an area that can cause many difficulties for a business owner or the decision makers in a company. However, there are many ways you can address this issue, so that you can focus on the more productive aspects of your organization. Below are some of the main ways to ensure that a business’s finances are kept in order.

Taxation

Every business must adhere to a wide range of tax laws and regulations. However, this is an area that keeps changing and evolving. It’s crucial to keep up-to-date with the latest taxation developments, so it’s advisable for you or someone in your company to increase their taxation knowledge by taking an appropriate taxation course provided by a college or university like Northeastern University.

Thanks to a range of online master of science in taxation programs, this is not as difficult or disruptive as it sounds. An online MST program can be completed over the internet, which means that a student can study at home, at work, or from any location that suits them. As well as this, you can study at times that suit your current lifestyle, which means you can carry on working as normal.

Hire the Right People

It’s vital to hire financial professionals who know exactly what they are doing. Some businesses may only require a single financial expert, while larger organizations need a wide range of financial professionals including accountants, bookkeepers and financial advisors. Make sure you have a strict hiring process that ensures that only the best financial experts work for you, because these are the people who could make or break your business in the future.Read the rest

How to Develop Positive Relationships with Individuals and Organizations Outside of Your Business

It’s vital for a business to develop as many external contacts as possible. This simple approach can lead to valuable relationships and opportunities that would not otherwise have occurred. Below are some of the best ways you can develop relationships with individuals and organizations outside of your business.

Develop Your Communication Skills and Communication Channels

Before you reach out to certain individuals and organizations, it’s important to prepare properly and have the skills and knowledge required for communicating in an effective way. For instance, if you want to interact with local government representatives and agencies in a more productive way, you may need to hire a consultant or someone who has completed an online masters in public administration and who has a great working relationship with the public sector.

In other situations, it may be a good idea for you or someone in your organization to enroll in an online master in public administration degree course or similar program provided by universities like Norwich University, so that you have a permanent person in your company who can deal with government entities that can help your business.

Attend Networking Events

Most people prefer to deal with other individuals and businesses they are familiar with. This means you and your business need to get public exposure. Attending networking events like Chamber of Commerce meetings, conferences, and industry seminars is an effective way to do this. The more times you are seen at these events, the more people will become familiar with you and start to trust you.Read the rest

Data Mining Functionalities

Data mining has an important place in today’s world. It becomes an important research area as there is a huge amount of data available in most of the applications. This huge amount of data must be processed in order to extract useful information and knowledge, since they are not explicit. Data Mining is the process of discovering interesting knowledge from large amount of data.

The kinds of patterns that can be discovered depend upon the data mining tasks employed. By and large, there are two types of data mining tasks: descriptive data mining tasks that describe the general properties of the existing data, and predictive data mining tasks that attempt to do predictions based on inference on available data. The data mining functionalities and the variety of knowledge they discover are briefly presented in the following list:

  1. Characterization: It is the summarization of general features of objects in a target class, and produces what is called characteristic rules. The data relevant to a user-specified class are normally retrieved by a database query and run through a summarization module to extract the essence of the data at different levels of abstractions. For example, one may wish to characterize the customers of a store who regularly rent more than movies a year. With concept hierarchies on the attributes describing the target class, the attribute oriented induction method can be used to carry out data summarization. With a data cube containing summarization of data, simple OLAP operations fit the purpose of data characterization.
  2. Discrimination: Data discrimination produces what are called discriminant rules and is basically the comparison of the general features of objects between two classes referred to as the target class and the contrasting class.
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