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The Capital Structure Decision and the Cost of Capital - Essay Example

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Finance & Accounting
Pages 4 (1004 words)


Subject: Finance and Accounting Customer Inserts His /Her Name Customer Inserts Grade Course Customer Inserts 11 August 2011 Finance and Accounting Funds are normally generated from debts and investments (Hilton, 2007). The research focuses on determining the advantages of investing in funds (stockholder) or borrowing money (creditors)…

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The Capital Structure Decision and the Cost of Capital

The products include dolls and accessories, vehicles, games, puzzles, as well as play sets. The company’s popular toy brands include the Barbie dolls, Polly Pocket, Little Mommy, Monster High, BabyGear, WWW Wrestling figures, Fisher-Price, CARS, Toy Story, Max Steel, and Batman. The company sells it toy products in physical stores as well as online stores. Based on the module discussions discussed, the nature of the Mattel ( company’s toy business operations and its toy clients, it is highly recommended that the capital structure (total liabilities or debt and equity proportions) must be adjusted to the medium debt ratio (1.0) type of business structure. The medium debt type of business organization can be equated to a financial position where there is an equal amount of total debt and total l equity. For, increasing the debt to an amount which is higher than the total equity would entail an increase in interest payments to the creditors. Creditors lend money in exchange for interest payments. In terms of amount, the current Mattel debt and equity amounts are high debt for both debt and equity amounts do not reach $3,000,000,000. Thus the medium debt ratio (1.0) amount can be reached my making either the debt equate the equity amount or the equity amount to equate the debt amount. ...
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