Capital Structure Theories and WACC Impact

This final part of the financial strategy series delves into capital structure theories, focusing on how the balance between equity and debt impacts the Weighted Average Cost of Capital (WACC). Learn about the significance of structuring a company's capital effectively and the implications on financial ratios and valuation.

• Capital Structure
• WACC
• Financial Strategy
• Equity
• Debt

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1. CORPORATION AND CORPORATE GOVERNANCE

2. WHAT IS CORPORATION? An artificial being created by operation of law, having the right to succession and the powers, attributes and properties expressly authorized by law or incident to its existence (The Corporation Code of the Philippines, Sec. 2 Watch video: What is corporation

3. Characteristics of Corporation: Artificial Being Created by operation of Law Right of succession Powers, Attributes and Properties

4. STAKEHOLDERS OF A CORPORATION

6. Management: Refers to the party given the authority to implement the policies as determined by the Board in directing the course/business activities of the corporation.

7. CREDITORS This refers to the party who lend to the corporation goods, services or money

8. SHAREHOLDERS: This refers to people who invest their capital in the corporation

9. EMPLOYEES These are the people who contribute their skills, abilities, and ingenuity to the corporation

10. CLIENTS They are the buyers of the corporations products and services

11. Government It is the duty and responsibility of the government to provide the people the basic ways and means to survive and the government gets the biggest help from the corporation

12. PUBLIC The result of responsible or irresponsible conduct of corporations can affect public in so many ways

13. PURPOSES OF CORPORATION Watch: role of corporation

14. Early Stage Survival To increase Profit To offer Vital Services to the General Public

15. To offer Goods and Services to the General Public To offer Goods and Services to the Mass Market

16. SHAREHOLDERS Shareholders or Stockholders are artificial or natural persons that are legally regarded as owners of the corporation

17. STOCKHOLDERS OR SHAREHOLDERS RIGHT

18. The right to vote on matters such as elections of the board of directors The right to propose the shareholder resolution

19. The right to receive dividends Pre-emption right which is right to purchase new shares issued by the company

20. The right to liquidating dividends

21. BONDHOLDERS Person or entity that is the holder of a currently outstanding bond Check video bondholders

22. BOARD OF DIRECTORS Refers to a collegial body that exercises the corporate powers of all corporations formed under the Corporation Code.

23. DUTIES OF THE BOARD OF DIRECTORS Watch Video BOD Functions

24. Establishing Policies and Objectives Selecting, appointing, supporting and receiving the performance of the chief executive Ensuring the availability of adequate financial resources

25. Approving annual budget Accounting to the stakeholders the organizations performance

26. MULTINATIONAL AND TRANSNATIONAL CORPORATIONS Watch video: TNC MNC

27. CORPORATE GOVERNANCE Structures or process by which companies are directed and controlled that will help them to operate more efficiently, mitigate risk and safeguard against mismanagement

28. WHAT GOOD GOVERNANCE PROMOTES? Watch: Good Governance

29. BENEFITS OF GOOD GOVERNANCE

30. Reduced Vulnerability Marketability Credibility Valuation

31. PRINCIPAL AGENT RELATIONSHIP

34. ROLES OF NONEXECUTIVE DIRECTORS -Is a member of the board of directors of a company who does not take part in the executive functions of the management team.

35. Strategy-offer creative contributions Establishing networks Monitoring Performance Audit- ensure that the company report properly to its shareholders

36. ROLES OF CFO Watch: CFO role

37. Implements internal control-convey important financial control Supervises major impact Projects Develop relations with financial sources Advisor to management

38. Drives major strategic issues Risk Manager Relationship role Objective referee

39. AUDIT COMMITTEE Watch : Audit committee

40. Examples of issues that the audit committee should consider: Risk identification and response Pressure to manage earnings Internal controls and company growth

42. EXTERNAL AUDITORS Used extensively by business organizations to cast away doubts on the information given by the management which are also generated under its direct control

43. REFERENCES: Good Governance and Social Responsibility Made Easy By: Biore, Gonzales, Caparas, Burgos, and Ballada 2015