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Impact of Capital Structure on Financial Performance in AU firms - Expert Assignment Help

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Question

Prepare a final business research report. The FINAL research proposal will consist of the following NINE (9) items:

1. A business research topic.
Strengthen and improve initial proposal.

2. A brief literature review of the research topic
Produce 2 to 3 pages on background information on your research topic.

3. Research questions for the identified problem or opportunity
Strengthen and improve initial proposal

4. Appropriate research methodologies and techniques to use for the research project
Strengthen and improve initial proposal

5. A project plan using a Gantt Chart and clearly defined milestones (if in a group with clearly defined individual tasks, contributions and milestones)
Use Microsoft Project or other software to produce the Gantt Chart.
Your milestones for HI6008 are:
Week 6: Literature Review due.
Week 10: Data Collection and Analysis Report due.
Week 14: Final Business Research (Capstone) Thesis due.

6. Description of the research process
Strengthen and improve initial proposal

7. Description of data collection and analysis methods
Strengthen and improve initial proposal

8. Description of expected research outcomes
Strengthen and improve initial proposal

9. A completed Ethics Checklist.
Complete and sign ethics checklist below and attach with FINAL research project proposal.

Solution

While carrying out the operations of the company, the company uses a mix of equity and debt and that combination is referred to as the capital structure. It has great effect on firm value as firm value is inversely related to the capital cost of firm. Hence, the sole purpose of recent strategic management is to assess the capital structure at its maximum level. The capital structure at maximum level can be determined only if exact proportion of equity and debt is taken, the capital cost decreases and the value of the firm improvises.

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Senior debt has the highest priority while common equity has the lowest priority. A judicious mix of different sources of financing is crucial to meet the target capital structure and achieve high financial performance. ROA is most often considered as a proxy of financial performance in the stock market as ROA estimates the ability of the company to earn income using its assets (Nag, Sirnmans, 2000). The tax effect on the company valuation and revealed that a firm that is leveraged has higher value compared to firms that have no debt (Miller, 1988). When the debt percentage increases, the firm value decreases because of bankruptcy risk (Stiglitz, 1969). ROA is most often used as metric of financial performance by the company's management because ROA is the combination of interest expense and profit after tax divided by average total assets of the company (Mishra, et al., 2009). In this thesis, we talk about the capital structure and its financial metrics as well as their impact on financial performance. This entails the researcher to assess the relation between capital structure and the firm's financial performance in AU over a period of 10 years from 2006 to 2015. 

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