Professional Documents
Culture Documents
Structure
Presenter:
Prof. Isha Dave
Therefore,
corporate
should
attempt
to
evolve
an
Profitability
Liquidity
Control
Leverage ratios in industry
Nature of industry
Consultation with investment banks/lenders
Commercial strategy
Timing
Company characteristics
Tax planning
in
terms
of
determining
the
amount
of
EBIT
1. Profitability Aspect
2) Interest Coverage Ratio
Interest Coverage ratio (EBIT/I) can also be used to judge the
adequacy of EBIT to meet the firms obligations to pay financial
charges, interest on loan.
A higher ratio implies that the firm can go for larger
proportion of debt in its capital structure.
The ratio measures the size of the interest payments relative
to the EBIT.
The reciprocal of this Income gearing ratio (I/EBIT) measures
the proportion of EBIT devoted to interest payments.
Cash
Flow Analysis
Liquidity
One
cash inflows. A firm can afford higher debt if the ratio is high.
Another
still
within
an
insolvency
limit
tolerable
to
the
3. Control
Lenders
3. Control
However,
most of the cases, they, like the creditors, do not have any
desired.
However,
management that there may be something wrong with the debtequity mix of the company.
5. Nature of Industry
The nature of industry is one of the most important elements in
5. Nature of Industry
Such industries can afford to have higher debt proportions in
capital structure as in lean years they do not run the risk of being
unable to meet their commitments.
It
6. Consultation With
Investment Bankers & Lenders
Another
analysts,
institutional
investors,
investment
bankers
and
lenders.
These
period
of
information
time,
acquire
regarding
expertise
securities
of
and
a
have
large
access
to
number
of
financial plan.
8. Timing Of Issue
Frequently
government
are
also
important
in
this
regard.
The
8. Timing Of Issue
High
includes
a broad
spectrum of
cases
of
bankruptcy.
The
foreign
controlled
Thank You