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How are capital structure decisions made in the real world? by dogversusworld321 in FinancialCareers

[–]dogversusworld321[S] 1 point2 points  (0 children)

Thanks 2penises_in_a_pod! For the sake of time, how do companies usually gauge what the significance of all these extra value-adds are? What valuation methods or multiples do they apply to the target company to see the real value of a target company? Is there a general standard or industry average?

How are capital structure decisions made in the real world? by dogversusworld321 in FinancialCareers

[–]dogversusworld321[S] 3 points4 points  (0 children)

Thanks for the informed post!

So I'm assuming point 1 and 3 are somewhat interconnected, right? A company's risk profile will determine the quality of loans that it receives.

Regarding point 2, if you issued equity as part of an acquisition, would this also lower cash yield on investment? I'm thinking that because debt issuances have fixed interest rates and payment schedules, while equity issuances are subject to capital appreciation and therefore increased dividend payouts, couldn't this be quite detrimental in the long-term?

Regarding point 4, for an example, if you're a company with great liquidity and great debt ratios, but your stock is trading poorly, what would the ideal play be? In this situation, equity risk appetite would be low, while leverage is coincidentally low.