Importance of capital structure PDF

Running head: THE IMPORTANCE OF CAPITAL STRUCTURE
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THE IMPORTANCE OF CAPITAL STRUCTURE
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THE IMPORTANCE OF CAPITAL STRUCTURE1
Table of Contents
1. What was your expectation before watching the video?..........................................................2
2. How has this changed after watching it?..................................................................................2
3. Has the video helped change your perspective about the issues?............................................2
4. How do you relate videos to the learning on module?.............................................................3
5. What have you learned that you can pass on to others?...........................................................3
Bibliography....................................................................................................................................5

THE IMPORTANCE OF CAPITAL STRUCTURE2
1. What was your expectation before watching the video?
I think capital structures provides any company the flexibility to grow in a financially
feasible manner along with allowing it to leverage its key resources and ensure greater
returns. I initially thought that the video will have been boring by discussing the similar
aspects and will not focus more onto the issue of capital structure.
2. How has this changed after watching it?
After watching the video I realized that there is lot more minute issues to delve into the
aspects of capital structure and these created a better understanding within me regarding
reformulation of an efficient capital structure within any company.
3. Has the video helped change your perspective about the issues?
The video helped me to understand that capital structure is the amount of operating money
that is acquired through the debt and equity. I learned that debt includes the loans and other form
of credit repayments like interest while equity involves selling of any company’s partial interest
to the investors as stocks. However, like debt financing, equity is not inclusive of any sort of
direct obligations as repaying funds in the future whereas equity investors becomes partial
owners of the firm which provides their a degree of control over the firm. Optionality in the debt
or equity is an example of capital structure. From a trading perspective when the market is open
taking enough liquidity from the market to maintain optionality is not great to ensure short
funding. Historical evidence of the 1980’s 90’s reveals that junk bonds were bad. Since, 2009,
after a surge in corporate borrowing it is need of the hour to rebuild liquidity and mitigate the
risk involved in shareholder’s backlash by obstructing the practice of using debts as a prudent
option to buy back stocks ("The Alchemy of Capital Structure", 2018). Thus after watching, the