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L2 26 Capital Structure > c describe the role of debt ratings in capital structure policy; > Flashcards

c describe the role of debt ratings in capital structure policy; Flashcards

L2 26 Capital Structure (5 decks)

a explain the Modigliani–Miller propositions regarding capital structure, including the effects of leverage, taxes, financial distress, agency costs, and asymmetric information on a company’s cost of equity, cost of capital, and optimal capital structure;

b describe the target capital structure and explain why a company’s actual capital structure may fluctuate around its target;

c describe the role of debt ratings in capital structure policy;

d explain factors an analyst should consider in evaluating the effect of capital structure policy on valuation;

e describe international differences in the use of financial leverage, factors that explain these differences, and implications of these differences for investment analysis.

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