Analysis Of Skycity Entertainment Group Limited Essay

Finding the perfect capital structure in terms of risk and reward can ensure a company meets shareholder expectations and protects a firm in times of recession. Capital structure refers to how a business puts its money to “work”. The two forms of capital structure are equity capital and debt capital. Both have their benefits and limitations. Striking that perfect balance between the two can mean the difference between thriving versus trying to survive.

Harrah Entertainment, Inc. is a multifaceted business with large scope of services. They compete in 23 locations to be viewed as best service-driven and customer-driven organization for their hotel accommodations, gambling experience, entertainment offerings, food and beverage options and quality. In many locations, competition is steep causing tight markets and desire to win an edge. Other competitors focus on outshining and glamorizing their amenities to attract and captivate the market (Delong & Vijayaraghavan, 2003). Harrah’s approach is much different; they focus on marketing-based attraction and consider their bread and butter to be in guest services and consumer satisfaction. Harrah’s model has historically relied heavily on its people to accomplish their goals of gaining market share, increase operating profits and revenue through creating memorable experiences for happy, hungry and tired guests (Delong & Vijayaraghavan, 2003).

Nevertheless, the use of the Optimal Capital Structure (OCS) is the right techniques to be used in order to acquire the right combination of debt and equity that can maximize the

Optimal Funding Terms: - An organization's proportion of short and long haul obligation ought to additionally be considered when analyzing its capital structure. Capital structure is regularly alluded to as a company's obligation to-value proportion, which gives understanding

While there are no hard and fast rules for optimizing a company’s capital structure, companies that are ahead of the curve use an efficient combination of senior debt, mezzanine debt, and equity capital to minimize their true cost of capital.

The course project involved developing a great depth of knowledge in analyzing capital structure, theories behind it, and its risks and issues. Before I began this assignment, I knew nothing but a few things about capital structure from previous unit weeks; however, it was not until this course’s final project that came along with opening

A wrong decision about the capital structure of their firm can leads towards the financial distress as well as towards bankruptcy. There are various theories to analyze capital structure. Among all these theories the trade off theory which derived by Modigliani and miller (1963) was the earliest and most recognized which explains the formulation of capital strcture. He consider taxation and suggested that the firm should carried debt as much as possible. Companies has an edge in using debt rather than using internal capital as the gain benefit from tax shield. It allows the firm to pay lower tax than they have. When using more debt than capital it created more firm

(Dr). T. Velnampy and J. AloyNiresh wrote an article with topic “The Relationship between Capital Structure & Profitability “. The article focuses on the fact that an unplanned capital structure could lead to inefficient use of the funds whereas a strategically planned capital structure maximizes the use of the fund and helps to adapt to economic changes. The authors shows the relationship between the capital structure and profitability of listed banks of Sri Lanka. Descriptive statistical tools were used to define and summarize the behavior of each variable over the period of time .The results of the descriptive analysis shows that the mean of debt/equity ratio is 825.2% which indicates that the debt of banks are 8.25 times more than the total equity which is abnormal in the market as 2 times is perceived to be the maximum ratio for other sectors if the firm is to maintain a safe position. This shows that banks in Sri Lanka depend heavily on debt rather than equity. This can also be seen from the mean value of debt to total fund ratio which is 89% which indicates that banks capital structure is made up of 89% of leverage and only 11% of

Modigliani and Miller were the first to theorize the issue of capital structure. In their seminal paper, ‘The Cost of Capital, Corporation Finance and the Theory of Investment, American Economic Review, (June 2011), they stated their capital structure irrelevance proposition that capital structure has no predictable material effect on corporate market values in a perfect capital market. Modigliani-Miller provides the basis for modern thinking on capital structure and was for the first time introduces the concept of capital structure. Their theory states that without taxes, bankruptcy costs and systematic information and in an efficient market, the firm’s value is not affected in which way the firm is financed.

The Optimal Capital structure is that Capital Structure at which the weighted Average cost of capital (Ko) is Minimum. It is that combination of Equity and Debt at which the total cost of capital is mini-mum.

Already in 1958, Modigliani and Miller have pointed the discussion of capital structure towards the cost of debt and equity. According to their first proposition, in a world of no corporate taxes and with perfect markets, financial leverage has no effect on a firm’s value. In their second proposition, they state that the cost of equity equals a linear function defined by the required return on assets and the cost of debt (Modigliani and Miller, 1958).

The determinants of financial structure have been looked on a consistent basis over many years. Recently it has been looked at in extreme detail due to the Financial Crisis which has had a major impact on firms due to the

There is need for them to therefore be familiar with capital structure theory as well as the benefits and drawbacks involved in the kind of method adopted in sourcing for funds.

The term capital structure in finance is the way a corporation finances its assets through the use of equity, debt, or hybrid securities (Ehrhardt & Brigham, 2009). While equity and debt have long since been well known economic terms, hybrid securities is a relatively new concept. It essentially combines debt and equity and pays a set rate of return or dividend until a preset date, when the owner has a few options such as converting the securities into shares (Wikipedia). Capital structure is then simply the proportion of the corporation's liabilities.

Fund is the most important criteria to operate any kind of business or organization. It can be raised by two sources i.e. Equity Capital and Debt Capital. These two sources of capital comprise the total capital structure. Capital Structure refers to the composition of all source and amount of funds collected to use or invest in business. In other words Capital structure refers to the capital and long-term liabilities of balance sheet. Therefore, it includes shareholder’s fund and long term loans.