Prepare a report for the managing director, Financial Management

Assignment Help:

The Managing Director of your firm is thinking aloud about an appropriate gearing level for the company:

"The consultants I spoke to yesterday explained that some academic theorists advance the idea that, if your objective is the maximization of shareholder wealth, the debt to equity ratio does not matter. However, they did comment that this conclusion held in a world of no taxes. Even more strangely, these theorists say that in a world with tax, it is best to ‘gear-up' a company as high as possible. Now I may not know much about academic theories but I do know that there are limits to the debt level which is desirable. After listening to these consultants, I am more confused than ever."

Required:

Prepare a report for the managing director both outlining the theoretical arguments and explaining the real-world influences on the gearing levels of firms.


Related Discussions:- Prepare a report for the managing director

investment, what are the stages involved in investment decision makin

what are the stages involved in investment decision making

Explain total assets equal the sum of total liabilities, Why do total asset...

Why do total assets equal the sum of total liabilities and equity?  Explain. Assets = Liabilities + Equity Assets are the items of value that a business owns. Liabilities ar

Misconceptions about financial manmagement, What are the misconceptions abo...

What are the misconceptions about Financial Management?

Dividend decision, Dividend Decision: The Dividend Decision is a decis...

Dividend Decision: The Dividend Decision is a decision taken by the directors of a company. It relates to the timing of any cash payments and amount made to the company's stoc

Basic assumptions of cost of capital, Basic Assumptions of Cost of Capital ...

Basic Assumptions of Cost of Capital The Cost of Capital is a dynamic concept affected by a multiplicity of economic and firm factors and assumes the following assumptions rela

State the term- financing decision, State the term- Financing Decision ...

State the term- Financing Decision The second financial decision is financing decision,which essentially addresses two questions: a. How much capital must be raised to fu

UMMB, what is the benefits of UMMB

what is the benefits of UMMB

Operating cycle, discuss the applicability of operating cycle in poultry in...

discuss the applicability of operating cycle in poultry industry[consider broilers]

How do risk-averse investors compensate, How do risk-averse investors compe...

How do risk-averse investors compensate for risk when they take on investment projects? For the reason of risk aversion, people demand elevated rates of return for taking on hi

Problems in computations of cost of retaining earning, Q. Problems in compu...

Q. Problems in computations of cost of retaining earning? Problems in computations of cost of retaining earning: it is sometimes argued that retained earning do not involve any

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd