Cost of Capital, Capital Structure and the Real World
The decision of how to finance a business’ operations requires a careful balancing act of risk and return. While debt financing is effectively cheaper than equity, it comes with greater risk. There is a long list of companies that ultimately went under as a result of taking on too much debt, unable to pay their interest payments when times got tough. As such, deciding the optimal capital structure for a business is easier said than done.
To do so successfully, you need to have a strong understanding of both capital structure theory and the practical considerations in the real world. The theory provides guidance on the best way to structure an organisation’s capital; however, it is based on assumptions. It’s important to consider the validity of these assumptions, given the organisation’s real-life situation, as well as other elements that could impact its optimal capital structure. We’ll explore both sides of the story in this course!
Provides 8 hours of CPD
- How the combination of debt and equity affects a firm’s capital structure and alters the level of risk and return faced by an entity
- How to calculate gearing and interest cover to assess the impact of a change to the capital structure on an organisation’s level of risk
- The weighted average cost of capital (WACC) calculation (with and without tax) to determine the average return required to satisfy shareholders and debt holders, given the organisation’s gearing
- The traditional theory of gearing and its view on the optimal capital structure of a firm to maximise its value
- Modigliani and Miller’s (M&M) theory of gearing and its view on the optimal capital structure – understanding both theories ensures you can apply either model, as appropriate, to make a robust financing decision
- How to calculate the market value of an entity, the cost of debt and the cost of equity to assess a firm’s capital structure
- The practical considerations when determining capital structure in the real world
- How capital structure applies to group entities and the key factors that need to be considered when arranging finance for groups
- The impact of capital structure on the financial statements and key performance indicators so that you understand how capital structure affects the organisation’s financial position
Applying what you learn:
In this course, we also offer you a range of practice questions that you can use to reinforce your learning and cement your knowledge. By the end of this course, you will have the tools you need to ensure the financial decisions you make or contribute to are grounded in reality, and the company’s capital structure is balanced effectively.
What’s included in the course?
Videos
- Thoroughly explores the concepts, theories and models for this topic
- The content is professionally explained by our expert tutors alongside a visual presentation
- Come with downloadable audio files so you can listen to the content offline and on the go
Handbooks
- Full coverage of the video content using engaging and easy-to-follow language
- A range of examples to show you how these concepts might apply to real-life situations, e.g. in finance
- A practical exercise for each module based on the subject’s application in a finance team
Practice questions
- A series of questions designed to test your understanding of what you’ve learnt on the course
- Designed to get you to apply what you’ve learned to scenarios and commit the theory to memory
Presentation slides
- The visual presentation from the video can be accessed for note-taking and for browsing alongside the video or audio download
- Can be viewed as still slides or in an interactive format to move around the screen
Purchasing the course
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Astranti CPD Course:
Cost of Capital, Capital Structure and the Real World
£149.00
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