Financial Decision Making

Running Head: FINANCIAL DECESION MAKING 1
FINANCIAL DECESION MAKING

FINANCIAL DECESION MAKING 2
Table of Contents
Introduction...........................................................................................................................................3
Question 1.............................................................................................................................................3
Question 2.............................................................................................................................................4
Relationship between firm value and the capital structure.................................................................4
Lower cost of Finance, Debt or Equity..............................................................................................4
Question 3.............................................................................................................................................5
Capital Structure Irrelevance.............................................................................................................5
Conclusion.............................................................................................................................................5
References.............................................................................................................................................6

FINANCIAL DECESION MAKING 3
Introduction
Capital structure is one of the most important concept as it determines the how a firm has
financed its assets either through the help of the equity or through the help of the debt. This
report talks about the relationship between the firm value and the capital structure, finds out
whether the equity is cheaper or the debt and lastly enables to understand the irrelevance of
the capital structure.
Question 1
Regal Automotive
Operating Cycle
Inventory Turnover Ratio Inventory * 365 60203830 63.44
Sales 948968
Accounts receivable Ratio Accounts Receivable * 365 48576755 85.32
Cost of goods sold 569381
Operating cycle 148.76
Cash Conversion Cycle Amount Total
Inventory Turnover Ratio Inventory * 365 60203830 63.44
Sales 948968
Accounts receivable Ratio Accounts Receivable * 365 48576755 85.32
Cost of goods sold 569381
Accounts Payable Accounts Payble * 365 54156510 95.11
Cost of goods Sold 569381
Cash conversion cycle 53.64
The operating cycle of the Regal Automotive is 148 days approximately and the cash
conversion cycle of the company is 53.64 days.