FIN501 MoD 4 Case Assin Essay Example | Topics and Well Written Essays - 1250 words

FIN501 MoD 4 Case Assin - Essay Example A financial structure of a company on the other hand includes the short term debts, business creditors and other short term liabilities (Ho and Lee, 2003). Most businesses finance their business through debt or equity or a combination of both. Through debts the companies secure long term bank loans or take bonds which are redeemable after a long period of time. Through equity the companies issue common shares, preferred shares and sometimes the retained earnings injected at the end of the trading period where a profit has been realized. This literature will examine the financial books and ratios of 3 companies and determine their financial structure and the risks they run in choosing that particular mix (Ehrhardt, 2013). The choice of whether to use exclusive debt or equity financing or what mixture depends on the financial position of the business, the credit standing, the tax situation of the country and the nature of the business. This mix will determine what the cost of capital i s (Finnerty, 2013). Equity financing has its own advantages in that there is no burden of debt hanging over the owner’s heads, they therefore do not run the risk of going bankrupt unlike when financed by a debt. The owners too consent to the risk of losing all their investment in case the business fails. The disadvantages of equity financing is that the many the investors the more the control of the business is diluted and so are the profit shares. Debt financing on the other hand is advantageous to the management of the business in that the lenders do not take any control of the business or direct how the money lent will be spent. The lenders also do not share the profit of the company, all they are entitled to is the loan repayment and the interest on loan. But one of the major advantages of debt financing is that it reduces the tax liability of the business because the interest paid on loan is tax deductible. This protects a part of income from taxation and at the same tim e lowering your business’ tax liability. The disadvantages of debt financing involve ruined credit rating and risking bankruptcy (Besley and Brigham, 2008). An optimal capital structure is one that attains a good balance between the returns of the capital structure and the risks that the structure exposes the company to. The optimal capital structure will minimize the risks involved yet maximize the returns and it also increases the valuation of the stock in the stock market at the same time minimizing the cost of capital (Ho and Lee, 2003). eBay This is a multinational company based in America with outlets in more than 30 countries worldwide. It was started in 1995 and deals with providing consumer-to-consumer internet services. Its nature of business involves providing an over the internet market where customers can auction their goods, this was the initial venture. However, with time the company has diversified its services providing online advertisement services through e Bay classifieds, online payment through PayPal and online event ticket trading through StubHub (Gitlin, 2007). Between 2005 and 2009 it had acquired Skype but then sold a majority stake so as to concentrate on the other internet services it was renowned for. Examining the financial statements of the company for the period ended 31st December 2012 the following information was obtained. The company has a total assets value of $37.074 billion

DuPont analysis (Apple vs Samsung ) Research Paper

DuPont analysis (Apple vs Samsung ) - Research Paper Example It is a recognized world brand that has led the process of digital migration in communication and computers. The main products produced by the firm are iPhone, iPad, Mac, iPod, iTunes, Mac App Store and iCloud. Apple Company primarily trades its shares in the NASDAQ while it’s also listed in other exchanges including mexico and paris. Samsung started as a small business solely owned by a Korean based business man who was mainly involved in export business. The business grew from exporting dried fish vegetables and fruits to manufacturing the products themselves. Years later the firm diversified its product line to electronics. The giant firm then expanded operations opening up branches all over the world while retaining its original brand name Samsung. The firm comprises more than 78 different companies and affiliates in its wide range of products. In the electronics sector, Samsung produces a wide variety including mobile phones, tablets, televisions and home appliances. The firm is worth being a bench mark for Apple Inc due to its experience and achievements in the market. The products of Samsung compete well with Apple products in the market thus the need to compare them. The efficiency of the firm can be measured using the DuPont analysis. DuPont analysis measures assets of their gross book value to produce a higher return on equity. The use of the gross book value is aimed at getting the actual return on equity without accounting for depreciation which artificially reduces the return on equity. Depreciation reduces the return on equity, but is not an actual activity that reduces income, but a value assumed that the asset depreciates by during the course of its usable life. To get the return on equity, the following formula is used: The firm, Apple Inc is currently not performing well when performance is measured using the DuPont identity. Apple Inc has a low return on equity compared to its competitor Samsung. Investors interested