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Friday, March 23, 2012

Sample analysis of company's Capital Structure

Sample how to do capital structure for your assignment....from my previous task.
ok, frenz have a look...sharing is caring..

Capital structure is the combination of debt and equity to finance a company. It is usually measured as either ratios of debt to equity or ratio of debt to assets. To overview the financial strength of a company, there are four leverage ratios can be used; Debt ratio, Debt equity ratio, Equity multiplier and Interest coverage ratio. Generally, the most used by analysts are the Debt ratio and Debt equity. These two are popular measurements tools in evaluating a company’s capital structure.

Formula of Debt ratio = Total Liabilities / Total Assets, then multiplied by 100%

Debt equity ratio = Long term liabilities / Total shareholder’s equity

The Computation of Capital Structure of Firm

Debt Ratio

Debt Equity Ratio

Formula

Total Liabilities

x 100%

Long term Liabilities

x 100%

Total Assets

Total Shareholder Equity

Year

2005

214,928

x 100%

148,375

x 100%

592,458

239,288

= 36.27 %

= 62 %

2006

273,631

x 100%

200,011

x 100%

699,511

244,253

= 39.12 %

= 81.87 %

2007

325,255

x 100%

170,979

x 100%

801,772

245,471

= 40.56 %

= 69.65 %

2008

268,788

x 100%

178,717

x 100%

903,097

286,383

= 29.76 %

= 62.30 %

2009

759,387

x 100%

301,570

x 100%

2,092,791

286,384

= 36.29 %

= 105.30 %


Table 2. The Computation of Ratios in Percentage for the Firm.

Year

2005

2006

2007

2008

2009

Debt ratio

36.27%

39.12%

40.56%

29.76%

36.29%

Debt Equity Ratio

62%

81.87%

69.65%

62.30%

105.30%

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