THE CAPITAL STRUCTURE DECISION

The capital structure conclusion and the cost of capital



The capital structure decision and the cost of capital

Introduction

Amazon

Amazon.com Inc is a US-based leading global electronic commerce company and one of the most trafficked Internet retail destinations worldwide. Amazon is an online shopping website with one of the largest product supplies online. Amazon directly sells, or acts as a stage for the sale of, a very broad variety of products, including books, melodies, videos, consumer electronics, apparel and house hold productss. Through year-end 2006, Amazon had approximately 64 million active customers worldwide.

Recommended Capital Structure

As amazon is an online retail company, therefore risks and competition do exist. Although it's one of the leading online retail company, but growth and expansion should never be stopped. Therefore Amazon must lower down it's debts and increase it's equity. It must issue further shares instead of obtaining loans so that it can raise funds for the expansion and introduction of new products. Its clientele includes common man as well, so it must introduce more consumer products to attract masses.

Amazon has established credibility for itself among masses, so risk factor is minimum on going towards expansion of business.

Increasing the equity through shares would be beneficial in the sense that shareholders would become the part of the company and repayment would not be a problem as in the case of obtaining loan through banks.

After focusing on all major aspects, Amazon may be suggested to go for a low debt to equity ratio.

BORDERS

Borders Group, Inc. is an international book and music retailer based in Ann Arbor, Michigan. Borders is the second-largest bookstore chain in the United States (after Barnes & Noble), with more than 500 Borders superstores in about 45 states, selling a wide variety of books, CDs, DVDs, periodicals, gifts and stationery, as well as about 175 small-format shops ...