4. Capital Structure Theory

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PROFESSOR: WAYNE ADLAM RSM 433 ADVANCED CORPORATE FINANCE CAPITAL STRUCTURE THEORY
CAPITAL STRUCTURE THEORY • There are many different theories regarding how firms determine their target capital structure, as well as how they choose to finance their operations going forward • Remember, companies do not need to take on debt (and lenders don't have to lend!) • For established companies (as opposed to start up's or VC backed ventures), debt is generally available either from banks or from the capital markets • As we have discussed, taking on debt can lower a company's WACC, making them more competitive, and making new business opportunities more attractive
CFO SURVEY (GRAHAM AND HARVEY, 2001)
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