Essays on Dynamic Capital Structure Choice Case Study

Download full paperFile format: .doc, available for editing

The paper 'Dynamic Capital Structure Choice' is a great example of a Finance and Accounting Case Study. Super Retail Group is focused more on equity financing as opposed to debt. This is a likely positive phenomenon since it allows the company to utilize the amount without the commitment of repaying it. This has enabled the company to focus on developing larger capital projects that have, in turn, ensured a steady increase in both sales and profits. This means that the immediate shareholders are likely to benefit from the operations of the company.

Notably, the firm deploys the risk management team that ensures risks are mitigated at almost all levels of operations. Thus, it will be fair that potential investors make investments with the company due to its rapid growth and effective business models deployed to improve sales growth over the years. Introduction The focus of this assignment is on analyzing the imminent activities of Super Retail Group. This company focuses on individual investors who participate in external tax-exempted share acquisition plans. It should be noted that the company’ s share acquisition is open to both foreign and domestic-based investors.

Subsequently, the firm allows the separation of management and ownership through the adoption of a limited liability company (Super Retail Group Limited, 2013). The firm’ s management base is tasked with the responsibility of ensuring the maximization of shareholders' wealth while owners' duties are depicted in regards to the selection and recruitment of both managers and the board committee. In regards to risk, Super Retail Group maintains a Risk Committee that ensures the practicability of good governance. Furthermore, the firm recognizes the existence of both material business and financial risks.

It is assumed that all of the business operations are conducted in an ever-changing environment that is marred with ultimate change and uncertainties (Super Retail Group Limited, 2013). However, the management of potential risks is executed with respect to constant review and minimization by way of embarking on corporate governance-based principles. Some of the sources of the firm’ s immediate risk profile include activities involving; first, global-based competitions given that the Retail is now focused on online shopping and overseas trading where competition is uncertain and stiff, . Second, the immediate proliferation of sales and marketing – based channels will likely create a risk profile that can inhibit the growth of the customer loyalty base (Super Retail Group Limited, 2013).

Third, the possible meltdown of conventional business models is likely to catapult competition based risks as well as cost pressures. Other sources of risks include the ever-changing customer expectations, workforce base demographics as well as a possibility of an increase in the regulatory requirements within the business operations (Super Retail Group Limited, 2013). Financial Analysis The company has adopted both debt and equity finances for purposes of financing its immediate business operations.

It is important to note that the business has adopted both long and short-term borrowings for purposes of ensuring that their respective operations are conducted without the possibility of foreclosure (Super Retail Group Limited, 2013). In regards to the mix of both debt and equity, the debt-to-equity ratio will help analyze the situation as below; Debt-to-equity ratio= total debt/ total stockholder’ s equity

References

List

Benninga, S, and Oded S, 1997, Corporate Finance: A Valuation Approach, McGraw-Hill, New York

Covas, F & Haan, W, J. 2006. The Role of debt and equity finance over the business cycle, Bank of Canada Working Paper, Retrieved on May 21, 2014 from http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp06-45.pdf

Fisher, E, Heinkel, R and Zechner, J. 1989, Dynamic capital structure choice: Theory and tests, Journal of Finance, 44, 19–40

Graham, R, J.2000. How big are the tax benefits of debt? The Journal of Finance, vol.LV, no.5: pp 1901-1942.

Green, R and Hollifield, B. 1999, The personal tax advantages of equity, Working

Paper, Carnegie Mellon University.

Kokemuller, N. 2012.The advantages and disadvantages of debt and equity financing, Chron. Retrieved on May 21, 2014 from http://smallbusiness.chron.com/advantages-disadvantages-debt-equity-financing-55504.html

Super Retail Group Limited. 2013. Annual report. Retrieved on May 21, 2014 from http://www.superretailgroup.com/investors-and-media/reports-and-publications/

Download full paperFile format: .doc, available for editing
Contact Us