What are the main practical considerations which are likely to Essay

What are the main practical considerations which are likely to influence a firm's capital structure - Essay Example Their study was based upon the assumption that perfect capital markets existed, i.e, there was an absence of taxes, bankruptcy costs and other market friction. Under such a condition, their conclusion was one of capital structure irrelevance, which means that the kind of capital structure chosen by a firm will not impact upon its value and hence there is no advantage to be gained through the creation of debt. The value of the firm will be totally dependent upon its assets and their expected value, as well as the risk of cash flow generated from those assets. However, these same authors later took taxation into consideration and their conclusion then was that one of the features that would promote an optimal capital structure for the firm was the employment of as much debt capital as possible. (Modigliani and Miller, 1963). Once corporate earnings taxes are introduced, then there is an advantage to the firm to be gained by the firm, because the tax shield that can be provided by debt results in a gain from leverage. In this context, Miller (1977) also introduced personal taxes into the equation and he discerns three distinct tax rates in the United States that determine the total value of the firm, which are (a) corporate tax rate (b) tax rate imposed on income of dividends and (c) tax rates imposed on the inflows of interest. Miller stated that the capital structure of a firm will depend upon the relative height of each of the tax rates as compared to the other two. When tax rates on income from stocks and bonds are equal, then the advantage from leverage is zero, hence capital structure of the firm becomes irrelevant. However, for example when the tax rates on the income from the stock is lower than the tax rate on incomes from the debt, then leverage will negatively affect the value of the untaxed firm. With non trivial bankruptcy costs, the introduction of leverage creates a negative effect of debt financing

Human Resource Management Essay Example | Topics and Well Written Essays - 2500 words - 19

Human Resource Management - Essay Example In response, a discussion of how HR managers can improve organizational performance through recruitment and selection, training and development, equality/diversity policies and employee involvement would be presented. All resources – man, money, methods, market, materials, minutes (representing time) and machines are the domain of general management. Human resources management solely involves man. Through and by men, the other m’s are acquired and utilized. The quality and utilization of the rest of the resources are almost always affected by decisions about and by human resources. Indeed, the accomplishment of the goals of an organization depends upon the availability and utilization of all these ingredients, the interaction of which, are people-caused. The acquisition, utilization and development of financial, material, technological and market resources which may be exhaustible are dependent on human resources. If the latter is available and capable, the other factors can be of great use to the organization. It is through people that they can be either harnessed and developed or dissipated and lost. Man does or undoes what exists; man creates or bypasses opportunities and scenarios. Hence, people power is the most significant and potent factor of all the resources available to an organization. An organization may start with zero funding, but with creative, resourceful, hardworking and honest people, it becomes financially viable. On the other hand, a plethora of financial and material resources in an organization may go down the drain if handled by an incompetent and dishonest staff. The significance of human resources in an organization has been emphasized by various scholars, to wit: Andres (2003: 48) averred that â€Å"the place of organizational objective is largely attributable to successful human resources management†. Clements