StudentShare solutions
Triangle menu

Corporate Finance - Essay Example

Nobody downloaded yet

Extract of sample
Corporate Finance

Due to recessionary conditions and down side of economy, there is no immediate chance of recovery. Accordingly, Qantas Airways, which has leveraged beta of 1.25 is certainly a more risky company compared to any other company in the table.
Above table suggests that business risks associated are lowest with Telstra Corp. and Coca Cola companies for having lowest beta of 0.16 and 0.15 respectively. Highest business risks are associated with BHP Billiton and Rio Tinto with beta of 0.52 and 0.43 respectively. As table indicates for the companies where finance risks are low (like CSL and BHP Billiton), business risk is high and the companies with high finance risk (like Coca-Cola and Telstra), business risk is low. Thus when we compare business risk with finance risk, we find that both are not consistent.
Further, comparing the figures of shareholder’s return of BHP Billiton and Coca Cola, we find that both have given almost same returns; however, there is a vast difference between their business risks and financial risks profiles. Obviously, they are following Modigliani and Miller theorem that value of the companies are independent of its capital structure.
3. BHP Billiton and Rio Tinto though belong to the same industry sector; they have vastly different debt-equity ratios. Rio Tinto is a high leveraged company and its return on equity in percentage terms is less than that of BHP Billiton, which indicates that servicing cost of debt lowers down the percentage return on equity. In other words we can say that higher leveraging does not bring any additional return to the equity holders.
Total shareholder’s return too in case of Rio Tinto is only slightly less compared to that of BHP Billiton’s shareholder’s return. Despite large percentage difference in return on equity, there is not a proportionate difference on the value of total shareholders return.
In short, above set of Australian companies do not seem to ...Show more

Summary

Looking at the given table of the financials of various Australian companies, we notice that Qantas Airways and Telstra Corp. are operating under high leverage. Both of these companies have high debt ratio of 2:1 or more. High-beta stocks are supposed to be riskier but…
Author : qreilly
Corporate Finance essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Corporate Finance"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Corporate finance
.....Financial Times Advanced Corporate Finance Assignment Name Surname Educational Institution Introduction It was estimated that 55,000 acquisitions valued at $1.3 trillion were materialised in the 1980s. Due to globalisation, the merger and acquisition activities reached $3.44 trillion in 2010.
6 pages (1500 words) Essay
Corporate finance
Share price refers to the price of a single share that company issues for subscription. While taking decision on share subscription, an investor compares the share price with company’s financial statements.
6 pages (1500 words) Essay
CORPORATE FINANCE
However empirical evidence remains inconclusive. In financial theory, disagreement exists with respect to the effect of capital structure on firm value. The traditional view of corporate capital structure and valuation holds that there is an optimal capital structure and thus the total value of the firm can be increased through a judicious financing mix.
6 pages (1500 words) Essay
Corporate finance
The other notion that dividend decisions also affect the value of a listed company proceeds from thinking along similar lines. Unfortunately (or fortunately, depending on how one looks at it),
18 pages (4500 words) Essay
Corporate Finance
each gearing level; to determine the EPS for each level of gearing under a bad year or good year; to construct a graph where EBIT and EPS are the axes and , using the EBIT-EPS data that will be developed, plot the data on the graph and discuss the possible ranges where lower
10 pages (2500 words) Essay
Corporate Finance
The world is truly becoming more of a global village every day. We cannot be separated from what is happening all across the world, as recent events unfold right across our TV screens 24/7 courtesy of satellite TV and the plethora of channels that work
1 pages (250 words) Essay
Corporate finance
ort for the finance minister about development of standard corporate reporting regulations in the country and importance of standard corporate governance regulations as an important part of corporate reports published by the public companies. Therefore, this report will deal
8 pages (2000 words) Essay
Corporate finance
The depreciation for the following years is calculated in the same way until year 8 when depreciation assumes straight linear method. In this case, the final salvage after 12 years is insignificant and in this calculation it is
3 pages (750 words) Essay
Corporate Finance
It is a multinational corporation, based in United Kingdom (UK) and it is listed on London Stock Exchange (LSE) (Rexam Plc, 2014c). GSK is regarded as the world’s sixth largest pharmaceutical company, which is based in Brentford, London. The company
7 pages (1750 words) Essay
Corporate finance
Instead of this, the market worth of the company depends on its operating profits. Company’s capital structure is the means by which a company funds its assets. It can finance or fund its operations either
8 pages (2000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment