Essays on Nuances of Debentures, Optimum Capital Structure, Equity, Operating Leverage Assignment

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The paper “ Nuances of Debentures, Optimum Capital Structure, Equity, Operating Leverage”   is a   meaningful example of an assignment on finance & accounting. Debentures can be defined as a medium to long-standing debt tool normally used by relatively large companies to borrow money, however, a debenture loan is normally not safeguarded by physical assets or security. Debentures have a fixed rate of interest unlike other loans and their security of the loan is determined by the overall creditworthiness and repute of the issuer. Debentures are mostly issued by corporations and the government to secure capital.

Debentures are normally documented in an indenture just like any other type of bong. They are also the utmost collective long-term loans taken out by a business. Debentures can be classified into two types: Convertible and Non-Convertible debentures. Convertible debentures as the name say convert they can convert into equity shares later in a specified period of time of the issuing corporation. Convertible debentures are of utmost striking to shareholders this is because of their capability to change and their nature of low-interest rate. Non-convertible debentures are, however, the steady debentures which cannot be transformed into the equity of the distributing company. Question 2 (a)Optimum capital structure can be defined as the best to equity ratio for a firm that exploits its worth.

The capital configuration is said to offer stability among the debt-to-equity ranges and thus minimizing the company’ s capital charge. However, to examine optimum capital structure the ratio of short and long-term debt would be measured. Furthermore, Optimum capital structure is the main obligation in any company’ s business finance sector since firms can raise capital with either debt or equity. (b)Equity is equal to total income less shares hence = (Rs. 2 00000 + Rs.

50000) – (Rs. 25000 + Rs. 400000) = Rs. 275000Market value can be computed by multiplying the current market price by outstanding shares therefore, Rs. 200000 × (11/100 × 25000) = Rs. 55000000.

References

Anthony Saunders. (2000). Financial institutions management: a modern perspective. McGraw-Hill College.

Heaton, James B. "Managerial optimism and corporate finance." Financial management (2002): 33-45.

Saunders, A., & Cornett, M. M. (2003). Financial institutions management: A risk management approach. Irwin/McGraw-Hill.

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