Question

Please help!

1. Introduction to capital structure theory Aa Aa In his private office, just down the hall from his conference room, the Chief Financial Officer (CFO) of Teuton Manufacturing is meeting with his newly hired assistant, Valentine. CFO Before our next meeting with the bankers, let's take a second and make sure that we have a common understanding about the company's capital structure. We get to choose the form of money used to finance Teuton's activities. We can use borrowed (debt) money or retained earnings, we can sell new shares of common stock, or we can sell new preferred shares. So, my question to you, Valentine, is how do we know what sources of financing have been used in the past, and how much of each should we use in the future? Valentine The eft-hand or top section of the company's balance sheet reports the forms of financing that have been used in the past. These forms of financing represent ongoing financial commitments of the firm. Since Teuton's current capital structure consists of 37.5% debt and 62.5% common equity, then we know that our current debt in the capital structure, is 37.5%. , or the proportion of CFO And? Valentine We know that Teuton can exhibit three possible capital structures: its current, actual capital capital structure, a target capital structure, and an optimal capital structure. The structure is the long-run structure at which Teuton ultimately wants to operate, while an capital structure will maximize the value of Teuton's common stock and make our hareholders very happy

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!

Answer 1

1. right hand or bottom

Reason : The left side shows the assets and right hand or bottom shows the liabilities.

2. debt capacity

3. target

4. optimal