Managerial accounting assignment

Managerial accounting assignment

This study has three objectives. First, it develops new evidence on the sensitivity of cost of capital in relation to financial leverage. Second, the findings are interpreted in the light of the existing financial theory. The concept of shifting of cost of capital curves is also introduced and explored both in theory and in relation to empirical testing. Third, the conclusions are placed within the framework of financial management at the business firm level.

To accomplish these objectives a new, heretofore untried, approach to testing the cost of funds to a firm has been developed. In contrast to the almost universally accepted cross-section analysis, this study develops cost of capital functions for each company separately. Subsequently these functions are aggregated, compared, and also analyzed in a cross-section fashion. This approach is supported by the fact that (1) both the Net Operating Income and Net Income theories of cost of capital are stated in terms of a firm, not industry or other grouping of firms, and (2) from the practical point of view the question of optimality of capital structure is relevant, and indeed operationally meaningful, only at the firm level.

Most business people who borrow money are familiar with the term financial leverage. Financial leverage, expressed as the ratio of debt to equity (L = D/E), refers to the magnitude that a business is financed by debt versus equity. The more debt the greater the financial leverage.

Analysis Decision-Making: Working in a business for profit environment making decisions and more importantly making good solid decisions is not only required to be part of a team in a successful organization making goods decisions is a necessary part of the path to gaining respect, promotions and overall success in the organization.

Cost versus benefit analysis is a decision-making model that is relative easy to use but at the same time provides the methods and analysis to make decisions that are in the best financial interest of the organization.

The first step is to identify the problem, what needs to be done and why. In my position as consultant in Pinnelas Printer Company one of our departments which molds plastics parts was constantly behind schedule. The production management for the area kept expressing their frustration with not being able to meet demand no matter what they did. The management with all, their hard work failed to identify the essential problem. The first course of action ...