THE ANALYSIS OF COMPANY'S CAPITAL AND EVALUATION OF FACTORS, WHICH INFLUENCE CREATION OF THE OPTIMAL CAPITAL STRUCTURE

In this article, the author will outline several stages of the process of determining optimal capital structure and will concentrate in particular on the first two stages of this process – analysis of company's borrowed capital and equity as well as the evaluation of the main factors, which influence capital structure. It is important to stress these preparatory stages, because successful operation of the company is built on properly understanding the relationship between risk and potential reward that is inherent in different alternatives of capital structure. These stages stress the importance of gathering reliable financial information about the company (enabling calculation of the ratios mentioned in the article) and performing risk analysis (relying in part on the external and internal factors described in the article) in order to decide on the optimal capital structure. The author cautions that rapid economics growth in Latvia will at least slow down over time. Managers need to take that into account, when planning capital structure and therefore avoid increasing their leverage to dangerous levels.

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Financing Decisions and Performance of Italian SMEs in the Hotel Industry

Cornell Hospitality Quarterly ◽

10.1177/1938965518816948 ◽

2018 ◽

Vol 60 (4) ◽

pp. 335-354 ◽

Cited By ~ 4

Author(s):

Marco Botta

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Optimal Level ◽

Pecking Order ◽

Optimal Capital Structure ◽

Financing Decisions ◽

Medium Enterprise ◽

Optimal Capital ◽

And Performance ◽

The Relationship

This study investigates the existence of an optimal capital structure for small and medium enterprise (SME) hotels through the analysis of the relationship between financing decisions and financial performance in a large sample of Italian hotel SMEs. The results show that hotel SMEs face an optimal capital structure that allows them to maximize returns to investors, while instead having both too little and too much debt reduces their financial performance. This notwithstanding, we show that hotel SMEs are not particularly concerned with optimizing their capital structure, and their funding behavior is deeply connected with the availability of internally available funds, a typical pecking order behavior, and they result extremely slow in converging toward their optimal level of leverage so that they could improve their performance by adopting a more sophisticated financial strategy.

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Optimal capital structure in agricultural cooperatives and implications for equity retirement

Agricultural Finance Review ◽

10.1108/afr-03-2020-0044 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Jeffrey Royer ◽

Gregory McKee

Keyword(s):

Interest Rate ◽

Capital Structure ◽

Financial Statements ◽

Rate Of Return ◽

Content Type ◽

Optimal Capital Structure ◽

Return On Capital ◽

Optimal Capital ◽

The Interest Rate ◽

The Relationship

PurposeThis paper presents a model for determining the optimal capital structure for cooperatives and explores the relationship between financial leverage and the ability of cooperatives to retire member equity.Design/methodology/approachA model is developed to determine the optimal capital structure and explore the relationship between capital structure and the rate at which a cooperative can retire member equity. Using data from cooperative financial statements, ordinary least-squares regressions are conducted to test two hypotheses on capital structure and equity retirement.FindingsThe model shows that the optimal capital structure is determined by the ratio of the rate of return on capital employed to the interest rate on borrowed capital and the required level of interest coverage. The regressions suggest that cooperatives choose their capital structure largely according to the rate of return on capital employed and the interest rate in a manner consistent with maximizing the rate of return on equity and that the rate at which cooperatives can retire member equity is directly related to leverage.Research limitations/implicationsThe model does not consider unallocated earnings. Analysis of the relationship between leverage and equity retirement yields results contrary to the assumptions of earlier studies.Practical implicationsCooperatives can use the model because the necessary parameters are easily understood and readily available from financial statements, lenders and industry sources.Originality/valueThe model is developed specifically for determining the capital structure of cooperatives and differs substantially from the corporate model. A theoretical basis is provided for the relationship between leverage and equity retirement.

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Customer Satisfaction, Efficiency, and Capital Structure as Determinants of Performance Transportation Companies in Indonesia

Mediterranean Journal of Social Sciences ◽

10.5901/mjss.2017.v8n1p123 ◽

2017 ◽

Vol 8 (1) ◽

pp. 123-133

Author(s):

◽

Abdullah Sanusi ◽

Hendragunawan S. Thayf ◽

Nur Alamzah

Keyword(s):

Customer Satisfaction ◽

Capital Structure ◽

Capital Market ◽

High Performance ◽

Secondary Data ◽

Sales Growth ◽

Optimal Capital Structure ◽

Optimal Capital ◽

And Performance ◽

The Relationship

Abstract This study aimed to describe the influence of customer satisfaction, efficiency and optimal capital structure to the increase of the performance of transportation companies in Indonesia. The study was designed in the relationship between variables. The data used is secondary data obtained from the Indonesian Capital Market Directory (ICMD) and the website of 22 companies that were used as samples for 3 years. Data were analyzed using descriptive and inferential statistics analysis to test the hypothesis. The result showed that the efficiency affected customer satisfaction and was reflected in the sales growth of the company. However, it did not have an impact on the level of capital structure as reflected in DER and the performance which reflected in ROA. We also found that there was an indirect effect on the efficiency of the capital structure and performance through customer satisfaction. We also found that there is a significant indirect influence on the efficiency and the performance through customer satisfaction and capital structure. Customer satisfaction capital affects the structure. When customer satisfaction is high, which is reflected in higher sales growth aspect, it will have an impact on the high capital structure, which is reflected in DER. The result shows that customer satisfaction has an effect on the performance. When customer satisfaction is high, which is reflected in higher sales growth aspect, it will have an impact on the high performance, which is reflected in aspects of ROA. The result also indicates that capital structure affects the performance. When a capital structure is high, which is reflected by the high DER aspects, it will impact on the high performance, which is reflected on aspects of ROA.

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The Moderating Role of Debt Financing on the Relationship Between Leverage and Performance: An Empirical Analysis of the Textile Sector of Pakistan

Organization Theory Review ◽

10.32350/otr.0201.01 ◽

2018 ◽

Vol 2 (1) ◽

pp. 01-15

Author(s):

Ummara Fatima

Keyword(s):

Capital Structure ◽

Textile Industry ◽

Debt Financing ◽

Debt Ratio ◽

Optimal Capital Structure ◽

Effect Model ◽

Optimal Capital ◽

And Performance ◽

The Relationship ◽

Textile Sector

The study examines how debt financing affects the leverage and performance relationship of the textile sector of Pakistan. The study also strives to elaborate the determinants of debt financing. Data has been collected from the annual reports of the textile companies listed at Pakistan Stock Exchange (PSE) for the years 2010-2015. Panel data techniques including Pooled OLS, Fixed Effect model, Random Effect model, and Moderated Panel Regression model were used for estimating the relationship between debt ratio, leverage and company-specific variables such as profitability and size. The results depict that the listed textile companies of Pakistan financed more than half of its assets by external borrowing. There is high asset tangibility in the Pakistani textile industry. The tax shield, which is the alternative of depreciation, is limited for the textile firms of Pakistan (Qamar, Farooq, Afzal & Akhtar, 2016). The independent variables’ interaction term with debt ratio shows a positive relationship with ROA other than asset tangibility. The trade-off theory suggests to follow a targeted optimal capital structure which is more favorable for a firm. Pakistani textile industry should adopt the model of optimal capital structure for balancing the costs and benefits.

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