Sign In
Not register? Register Now!
Essay Available:
You are here: HomeEssayAccounting, Finance, SPSS
Pages:
6 pages/≈1650 words
Sources:
8 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 28.08
Topic:

The Capital Structure of Microsoft Corporation (Essay Sample)

Instructions:

Capital Structure of Microsoft Corp.

source..
Content:

Name:
Institution:
Instructor:
Course:
Date:
Capital Structure of Microsoft Corp.
Introduction:
Capital structure of a corporation involves the use of its relative debt and equity in order to finance its operation. The more the debt involved the higher the firm’s earnings stream riskiness. On the other hand, a very high return rate is expected, bearing in mind that stocks price will be lowered due to the huge debt. However since the expected return rate is generally high, this will facilitate stock investment to more investors and in turn increasing the stocks price. This clearly illustrates optimal capital structure which is the criteria approached to achieve maximum stock price by equating risk and return. The important factors that affect the capital structure of a corporation include national tax and local creditors’ rights.
Currently, the company’s capital structure is facing many challenges particularly the windows and windows live division. This has been facilitated by current development in the IT sector where “tablets and smart phones have been introduced in the market” (Charles, p., 34).
This has led to the retailing customers reaching for them rather than the old version of desktop. To catch up with the competition, Microsoft Corporation intends to release windows 8 beta. This will facilitate the corporation’s market development in an excellent manner (John et al, 43).For instance, the average debt ratio and interest rate for each S&P rating from AAA to B , derived from S&P(2006) by the use of standard and poor’s rating and ratios was as follows :
ROW
Bond rating
AAA
AA
A
BBB
BB
B
1
TD/(TD+E)
0.124
0.28
0.375
0.425
0.537
0.758
2
YIELD (%)
4.150
4.650
4.900
5.900
7.050
9.050
TABLE A (*Debt ratios taken from S&P)
Table A gives the average total debt ratios for ratings from AAA to B. with reference to the table it is true to claim that it is a tendency for a manufacturing company’s bond rating, such as Microsoft corp. to decrease as the financial leverage increases in the capital structure. As the company increases its financial leverage amount in the capital structure the bond rating drops and the cost of debt rises.
Microsoft Corporation’s capital structure has changed recently in a way that is not impressing and quick measures need to be put in place so as to avoid total fall down of this company. This is a fact proven by Territory Manager at Microsoft Corporation, Mr. Charles Clark.” Currently, the company’s capital structure is facing many challenges particularly the windows and windows live division”.
In summation, this kind of capital structure does not fit to a company of such class d

...
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:

Other Topics:

  • Calculation of the Payback Period to Formulate an Investment Decision
    Description: Payback period may be defined as the time initial cost of investment is anticipated to be recovered by the cashflows from the investment (Lin, 2010). Each year project’s cashflows do not depict annuity, therefore the payback period is calculated by calculating the cumulative cashflows and the payback period...
    3 pages/≈825 words| 3 Sources | APA | Accounting, Finance, SPSS | Essay |
  • Accounting for Investment Securities
    Description: Investment securities are financial assets that can be traded, and they include equities of fixed income instruments. Tradable financial assets are usually made with one objective to make long-term profits. There are other forms of investment securities as far as equities are concerned. For example, debt...
    3 pages/≈825 words| 3 Sources | APA | Accounting, Finance, SPSS | Essay |
  • Understanding the Self Efficacy of Individuals
    Description: Self-efficacy is, literary and colloquially, one's belief in their capability to thrive in particular situations. A product of Bandura’s Social Cognitive Theory of 1977, it has proven to be an influential tool in people's motivation levels now and then. Its influence in making decisions, setting goals...
    1 page/≈275 words| 5 Sources | APA | Accounting, Finance, SPSS | Essay |
Need a Custom Essay Written?
First time 15% Discount!