Agenda
In this session, you'll explore how companies can maximise shareholder wealth by choosing the right mix of debt and equity financing.
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In this lesson
- 0:00 Capital structure theories introduction
- 0:07 Maximising shareholder wealth efficiently
- 0:16 Traditional view of debt and equity
- 0:28 Modigliani and Miller theory explained
- 0:41 Pecking order theory and financing choices
- 0:50 Capital structure and risk management
About this lesson
You'll learn the key capital structure theories—from the traditional view that debt is cheaper than equity, through Modigliani and Miller's proposition that capital mix doesn't significantly affect weighted average cost of capital, to pecking order theory and how capital structure relates to risk. This foundation is essential for Advanced Financial Management and Strategic Business Leader papers, where capital structure decisions directly impact exam questions and real business scenarios. By understanding these competing theories, you'll be able to analyse financing decisions confidently and explain why companies choose different debt-to-equity ratios based on their circumstances and risk profile.
Duration: 1m
Transcript
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