select a any company you Know of. calcule it's financial leverage from themost current year. how...
select a any company you Know of. calcule it's financial leverage from themost current year. how much risks do see in the capital structure?
Homework Answers
We will be performing calculations on the financial data of Reliance Industries Ltd. to understand the concept of financial leverage and Risk in the capital structure.
Financial Leverage: Financial Leverage occurs when an entity uses Debt funds in addition to equity funds in its business. It shows the ability of an entity to use its fixed financing charges to leverage/Magnify its profits. Formula for calculating Financial leverage is: %Change in Earning per share (EPS) / %Change in Earnings before interest and taxes (EBIT) . (Alternatively it can also be measured by EBIT/Earnings after tax)
Reliance Industries Ltd. has the following financial data:
| March 18 | March 17 | Difference | % Change | |
| EPS | 53.06 | 96.65 | -43.59 | 0.451 |
| EBIT | 49,582 cr | 42,227 cr | 7,355 | .1742 |
Financial Leverage: 0.451/.1742 = 2.58
Risk in Capital Structure: It is measured by Deb equity ratio i.e. Total Debt / Total Equity
Total Debt = 2,153
Total Equity = 317760
Debt equity ratio = 2,153/317,760 = 0.30
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Please help! Blank #1 "The ... section of the company's" (left-hand or top / right hand or bottom" Blank #2 "then we know our current ... , or the proportion" (equity capacity...
Please
help!
Blank #1 "The ... section of the company's" (left-hand or top /
right hand or bottom"
Blank #2 "then we know our current ... , or the proportion"
(equity capacity / debt capacity)
Blank #3 "the ... capital structure is" ( target / optimal)
Blank #4 "while an ... capital structure" (optimal / actual)
If correct I will thumbs up, thank you!
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Please
help!
Blank #1 "The ... section of the company's" (left-hand or top /
right hand or bottom"
Blank #2 "then we know our current ... , or the proportion"
(equity capacity / debt capacity)
Blank #3 "the ... capital structure is" ( target / optimal)
Blank #4 "while an ... capital structure" (optimal / actual)
If correct I will thumbs up, thank you!
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