Changes in firm’s Capital Structure during the 3 years: Comparing ANZ Limited Capital Structure from 2015...
Changes in firm’s Capital Structure during the 3 years: Comparing ANZ Limited Capital Structure from 2015 to 2017 Particulars 2017($ million) 2016($ million) 2015($ million) Debt 107,973(2017) 113,044(2016) 110,756(2015) Borrowing and deposit 595,611 and 588,195 and 570,794 for 2017,2016 and 2015 respectively .Also Total Debt 703,584 and 701,239 and 681,550 for 2017,2016 and 2015 respectively Equity 29,088 and 28,765 and 28,367for 2017,2016 and 2015 respectively What can we learn from the changes in this capital structure over 3 years ??
Homework Answers
The given information can be tabulated as follows:
(Amount in $million)
| Particulars | 2015 | 2016 | 2017 |
| Debt | $110,756 | $113,044 | $107,973 |
| Borrowing & Deposit | $570,794 | $588,195 | $595,611 |
| Total Debt | $681,550 | $701,239 | $703,584 |
| Equity | $28,367 | $28,765 | $29,088 |
- As seen in the table above, the Debt increases by $2,288 Million from 2015 to 2016, however it has decreased by $5,051 Million, indicating an overall fall in consumption of debt by ANZ Ltd.
- At the same time, the borrowing & deposits have been increasing throughout. A total increase of $24,817 Million from 2015 to 2017, with $17,401 Million from 2015-16 and $7,416 Million from 2016-17.
- Overall, ANZ Ltd. has reduced it's dependence on Debt (presumably long term debt), but continues to take on the advantage of leverage through the borrowing and deposits.
- ANZ Ltd. has (presumably) issued $721 Million in the 2-year period from 2015-17. The rise in Equity has been at a decreasing rate, with $398 Million from 2015-16 and $323 Million from 2016-17.
- An increase in reliance of Equity has been seen, probably to compensate the fall in debt
The following analysis of Debt to Equity ratio shall make it easier:
| Ratio | 2015 | 2016 | 2017 |
| Debt to Equity | 24.03 | 24.38 | 24.19 |
- The growth in debt to equity ratio has been relatively steady, indicating the substitution of decrease in debt with an increase in Borrowing&Deposits and Equity.
- A higher dependence on Equity may have been undertaken to reduce the fixed (interest on debt is fixed) component.
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