Rights Contact Login For More Details
- Wiley
More About This Title Capital Structure Decisions: Evaluating Risk and Uncertainty
English
Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties. Dynamic paradigm shifts and the multi-dimensional operations of firms further complicate the situation. Financial leaders are under constant pressure to outdo their competitors, but how to do so is not always clear. Capital Structure Decisions offers an introduction to corporate finance, and provides valuable insights into the decision-making processes that face the CEOs and CFOs of organizations in dynamic multi-objective environments.
Exploring the various models and techniques used to understand the capital structure of an organization, as well as the products and means available for financing these structures, the book covers how to develop a goal programming model to enable organization leaders to make better capital structure decisions. Incorporating international case studies to explain various financial models and to illustrate ways that capital structure choices determine their success, Capital Structure Decisions looks at existing models and the development of a new goal-programming model for capital structures that is capable of handling multiple objectives, with an emphasis throughout on mitigating risk.
Helps financial leaders understand corporate finance and the decision-making processes involved in understanding and developing capital structureIncludes case studies from around the world that explain key financial modelsEmphasizes ways to minimize risk when it comes to working with capital structuresThere are a number of criteria that financial leaders need to consider before making any major capital investment decision. Capital Structure Decisions analyzes the various risk management and corporate governance issues to be considered by any diligent CEO/CFO before approving a project.
English
Yamini Agarwal is currently Vice Chairperson and Professor of Finance at the Indian Institute of Finance. She also edits the refereed quarterly journal Finance India, as its Associate Editor.
She has completed her doctorate in Finance from The Indian Institute of Technology (IIT), Delhi on Capital Structure Decisions under Multiple Objectives. She has also successfully completed a Strategic Business Finance program for Senior Executives as a sponsored and nominated candidate of SIDA (Swedish International Development Authority) in Sweden and Malaysia.English
Preface xi
Acknowledgments xv
Chapter 1: The CFO’s Role in the New Global Economy 1
The Decision-Making Process 2
Goals of a CFO’s Team 5
A CFO’s Constraints 6
Recent Issues in Capital Structure Decision Making 7
Summary 9
Chapter 2: Time Dimensions of Capital Structure Decisions 11
Sources of Funds 12
Cost of Funds 14
Cost of Loan Funds or Bonds 17
Summary 20
Chapter 3: Predicting and Evaluating a Firm’s Performance 21
Income Statement 34
Balance Sheet 35
Cash Flow Statement 36
Funds Flow Statement 36
Significant Accounting Policies and Notes to Account 36
Ratio Analysis 37
Predicting Bankruptcy 41
Summary 43
Chapter 4: Maximising Value with Capital Structure Decisions 45
Value-Based Management Framework 46
Valuations 46
Variations in Cost of Capital 49
Formula-Based Approaches to Valuation 50
Summary 56
Chapter 5: Risk Dimensions to Capital Choices 57
Capital Sources 60
Types of Risk and Their Measures 61
Capital Choices and Risk Management 62
Requirement for Equity Capital and Risk 64
Framework for Risk Management 65
Summary 66
Chapter 6: Role of Off–Balance Sheet Capital 67
Fixed-Asset Financing 68
Working Capital Financing Options 71
Effects on the Balance Sheet 82
Summary 84
Chapter 7: Innovations in Capital Structure 85
Forms of Financing 86
Financial Innovations 87
Summary 94
Chapter 8: Global Markets and Efficiencies in Capital Structure Decisions 95
Reasons for International Financing 96
International Bond Market 98
International Equity Market 99
Bank Loans 99
Financial Structure for a Global Firm 99
Doing Business in Select Countries: Political, Legal, Social, and Financial Aspects 100
Summary 125
Chapter 9: Theoretical Frameworks for Capital Structure Decision Making 127
Review and Synthesis of Theoretical Frameworks 127
Capital Structure Puzzles 131
Summary 138
Chapter 10: Strategic Determinants of Sources of Capital 139
Strategic Considerations 141
Mission and Vision 142
Strategic Targets and Objectives 144
Devising Strategic Capital 147
Motives for Issuing Equity 151
Motives for Issuing Debt 154
Motives for Issuing Foreign Debt 156
Motives for Issuing Convertibles 157
Factors Motivating Debt Maturities 158
Summary 160
Chapter 11: Economy-Driven Capital Structure Practises 161
Understanding Capital Structure Practises 161
A Firm’s Access to Capital and Business 165
Capital Structure Decisions in Emerging Economies 168
Financial Structures Linked to Global Development Indicators 172
Present Global Markets and Capital Choices 175
Summary 178
Chapter 12: The Role of a Decision Maker in Capital Structure Decisions 179
Revisiting the Decision-Making Process 181
The Goals of a Decision Maker 183
A Decision Maker’s Characteristics and Attributes Matter 185
Summary 190
Chapter 13: Behavioural Evidence of a CFO’s Decision-Making Process 193
The CFO’s Role in Indian Industry 194
CFOs’ Working Attributes for Capital Structure Decisions in India 197
CFOs’ Operational Aspects in the United States 200
Summary 203
Chapter 14: A Multiple-Objective Framework for Capital Structure Decisions: A Goal-Programming Approach to Decision Making 205
Evaluation of Mathematical Programming Techniques 206
Evaluation Techniques under Uncertainty 210
Model Specifications for Capital Structure Decision Making 214
Application of Goal-Programming Models for Capital Structure Decisions 216
Data Compilation for Model Development 217
Capital Structure Practises in India 219
Goal-Programming Model for Capital Structure Decisions Using Accounting Proxies 226
Case 1: α1 Co. (Alpha One Company) in the Agriculture Industry 227
Summary 236
References 237
About the Author 245
Index 247
