In a “perfect world” environment with no taxes, no transaction costs and perfectly efficient financial markets, capital structure does not matter.
This is known as the Independence hypothesis: firm value is independent of capital structure.
• Permanent Assets (those held 1 year)
– should be financed with permanent and
spontaneous sources of financing.
• Temporary Assets (those held
• Permanent Financing
– intermediate-term loans, long-term debt,
preferred stock, common stock
• Spontaneous Financing
– accounts payable that arise spontaneously
in day-to-day operations (trade credit,
wages payable, accrued interest and taxes)
• Short-term financing
– unsecured bank loans, commercial paper,
loans secured by A/R or inventory...
The Honorable David Laro was appointed by President George H. W. Bush to the United
States Tax Court, confirmed by the Senate, and invested as a federal judge in November 1992.
He formerly practiced law in Michigan for 24 years, specializing in tax law.
Judge Laro is a graduate of the New York University School of Law (LLM in Taxation,
1970), the University of Illinois Law School (JD, 1967), and the University of Michigan
Before joining the U.S. Tax Court, Judge Laro was chairman and CEO of a publicly
traded international company.
Certainty Equivalent Approach Steps:
1) Adjust all after-tax cash flows by certainty equivalent factors to get certain cash flows.
2) Discount the certain cash flows by the risk-free rate of interest.
How do we determine the appropriate risk-adjusted discount rate (k*) to use?
Many firms set up risk classes to categorize different types of projects.
We are living in interesting times. We are coming out of a recession that
was a once-in-a-generation event; it caused high unemployment, a large
number of home foreclosures, and substantial losses in the stock market and in
retirement savings plans. In addition, there have been unprecedented financial
frauds and natural disasters, causing personal and financial losses to many
individuals. At the same time, a new administration has worked to ease some
of the pain for taxpayers while advancing certain reforms, such as health care
Project management office (PMO) has a strong supply-side role in ensuring all projects
are delivered successfully, but this requires involvement in decisions about whether the investment
is likely to succeed. It therefore provides advice to the governance group on business cases, risks and
project performance. It also has a policing or regulatory role in ensuring projects and programmes
conform to agreed standards and best practices. It should have staff who are business matter
experts (BMEs) as well as SMEs. The use of the PMO services by project managers is mandated.
In the project and programme management community opinion is divided on the role of PMOs in
delivering programmes and whether they confer real benefits. The UK Office of Government
Commerce (OGC) views a PMO as an important part of programme and project management
organisation structures, and in its P3O model
promotes a three-level structure comprising a
portfolio management office, a programme management office and a project management office.
Responders to this study told us that when a project fails, an average of one-third of that project’s
budget is lost for good. Taken with the analysis in the previous section that shows that on average
36% of projects do not meet their original goals and business intent, organizations are putting at risk
twelve cents for every dollar spent on projects. Therefore, just over US$120,000 is at risk for every
US$1 million spent on projects.
The size of project budgets managed by respondents in this study varies widely. However, the average
project budget is US$4.
Chapter 2 - The business, tax, and financial environments. In this chapter, we will explore the advantages and disadvantages of the various alternative forms of business organization. Next, we will look at the tax environment in order to gain a basic understanding of how tax implications may impact various financial decisions. Finally, we investigate the financial system and the everchanging environment in which capital is raised.
In this chapter we explore the principles of both operating leverage and financial leverage. The former is due to fixed operating costs associated with the production of goods or services, whereas the latter is due to the existence of fixed financing costs – in particular, interest on debt. Both types of leverage affect the level and variability of the firm’s after-tax earnings, and hence the firm’s overall risk and return.
In this chapter, we examine fi nancial statements, taxes, and cash flow. The goal of this chapter is to briefl y examine such statements and point out some of their more relevant features. This chapter pay special attention to some of the practical details of cash flow.
The topics discussed in this chapter are financial statements, taxes and cash flow. On completion of this chapter students will: Know the difference between book value and market value, know the difference between accounting income and cash flow, know the difference between average and marginal tax rates, know how to determine a firm’s cash flow from its financial statements.
As noted at the beginning, it is impossible to enumerate all of the types of laws and regulations that impact on business today. In fact, these laws have become so numerous and complex, that no business lawyer can learn them all, forcing increasing specialization among corporate attorneys. It is not unheard of for teams of 5 to 10 attorneys to be required to handle certain kinds of corporate transactions, due to the sprawling nature of modern regulation.
Cùng tìm hiểu Types of leases; Tax treatment of leases; Effects on financial statements; Lessee’s analysis; Other issues in lease analysis;... được trình bày cụ thể trong "Bài giảng Management theory and practice Financial: Chapter 15". Mời các bạn cùng tìm hiểu để nắm bắt nội dung thông tin tài liệu.
Our study investigates how ultimate ownership structure and the corporate tax rate affect the equilibrium trade-off relation between manager ownership and debt in reducing agency costs. Considering the presence of the controlling shareholder, we find that higher corporate tax
rates strengthen the trade-off relation between manager ownership and debt while higher
control rights held by the controlling shareholder weaken it as well as the strengthening effect
of corporate tax rate.
Chapter 18 - Cost volume profit analysis. In this chapter, you will learn: What is CVP analysis? the break-even point, graphing CVP relationships, target net profit, using CVP analysis for management decisions, CVP analysis with multiple products, including income taxes in CVP analysis, practical issues in CVP analysis, an activity-based approach to CVP analysis, financial planning models.
Chapter 21 - Information for capital expenditure decisions. In this chapter you will learn: Capital expenditure decisions, the capital expenditure approval process, techniques for analysing capital expenditure projects, other issues in capital expenditure analysis, income taxes and capital expenditure analysis, investments in advanced technologies, post-completion audits, the limitations of capital expenditure analysis.
In this chapter, we will explore the advantages and disadvantages of the various alternative forms of business organization. Next, we will look at the tax environment in order to gain a basic understanding of how tax implications may impact various financial decisions. Finally, we investigate the financial system and the everchanging environment in which capital is raised.
To understand better the role of financial managers, you must be familiar with the environments in which they operate. The form of business organization that a firm chooses is one aspect of the business setting in which it must function. We will explore the advantages and disadvantages of the various alternative forms of business organization.