Amy Cockburn - AF6002 Blog

The Company men is a film based on how the recession and severe market plunge resulted in mass job losses, specifically leaving three of the main characters; Bobby Walker, Gene McClary and Phil Woodward redundant. The reasoning behind the mass redundancies at shipping and manufacturing conglomerate, GTX, was to downsize in order to raise their stock prices. One main worry a shareholder would have here is that when the economic climate is facing difficulties, there is a large chance that GTX’s profitability will suffer. As a result of this, shareholders could make the decision not to invest In GTX due to concerns of whether or not they are making a large enough profit, in turn meaning that their share price will fall. This then explains why GTX would downsize, as having a lower amount to pay out for company salaries will increase their profitability and this therefore shows shareholders that their main aim is to maximise shareholder wealth. One theoretical concept that could a...

A dividend is a sum of money that comes from excess earnings, which a company pays their shareholders annually through two different payments, these being; the Interim payment, which comes after their interim results are published and a Final payment, which comes after the year has ended. Whilst it is not a legal requirement for companies to pay dividends, a lot of companies will make the choice to pay them in order to keep their shareholders interested. However, a company does have the ability to lower their dividend at any time, which can often be linked to a company’s level of investment, for example; when a company decides to invest, the first question that will be asked is; how will we finance this investment? Which is the exact same question that is asked when a company decides to offer a dividend to shareholders. As a result of this, due to shareholder power, companies will tend to offer a higher dividend which in turn means that there will be a lower amount of investment from s...

All companies will have a capital structure, each different from the next. A capital structure is the combination of sources of capital that a company uses and the different costs, rewards and risks associated with each source of capital. For example, debt finance has lower levels of risk, therefore it is cheaper to obtain, whereas, equity finance has higher levels of risk and therefore is more expensive due to high returns being demanded by shareholders. When it comes to the financing of a company, the most common question will probably be; What is the optimal capital structure? Though, it is very difficult for companies to decide what the optimal capital structure is, due to a high number of differing opinions. One way in which a company is able to find an optimal capital structure is through the use of their Weighted Average Cost of Capital (WACC), as during this calculation it is clear to see that when a larger amount of debt finance is used, a companies WACC will be lower du...