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Assignment on Finance - Master Ltd

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Added on  2020-07-22

Assignment on Finance - Master Ltd

   Added on 2020-07-22

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Finance Case Study 2
Assignment on Finance - Master Ltd_1
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Capital structure and pay-out policies ..................................................................................11.2 Evaluating policy and practical considerations.....................................................................4TASK 2............................................................................................................................................5Financial analysis .......................................................................................................................5Valuable recommendation..........................................................................................................7CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................9
Assignment on Finance - Master Ltd_2
INTRODUCTIONFinance is an utmost important part for every business organization. In order to make acritical analysis, a decent amount of capital is required. This will assist in the attainment of shortand long term aim and objectives. This project reports summaries two vital tasks which describecapital structure and pay-out policies analysis of “Masters limited”. Overall financial analysis isbeing done to determine the accurate growth and financial stability of an organization (Brealeyand et. al., 2012). TASK 11.1 Capital structure and pay-out policies In every business organization, it is important to have sufficient amount of capital tomanage and operate their everyday operations in the best suitable manner. Capital structure ofMaster Ltd refers to the composition of their total capitalization that consists of every long termcapital sources. This can be measured through using various ratios of permanent loan and equitycapital to total funds available with company. It is used to show relationships among Masters Ltdtotal debt obligation, preferences and equity portion in the balance sheet.Capital structure policy and financial planning often include trade-offs among total riskand returns. The use of debts outcomes in financial leverage is to find out magnifying impactson returns to the Masters owners in order to measure earnings per share (EPS) and return onequity (ROE) (Embrechts, Klüppelberg and Mikosch, 2013). Some crucial theories of capitalstructure are mentioned as below:Net incomes approach:This method suggests that total value of firms can be maximized by reducing the overallcost of capital (WCC) through higher liability proportion. This can be done through havingmaximum debt proportion which is an economical source of finance as compared to equity.Certain assumption to this theory are:With the increase in debts will not affect the perception of investors.Cost of debt must be less than the cost of equity.There is no tax levied.WACC: RR*cost of equity+ RR*cost of debtTotal cost of capital = Debt + EquityMonthly returnsExpected return 1
Assignment on Finance - Master Ltd_3

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