Optimal Capital of a firm: compare 3 company's beta, capital structure, debt ratio
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1. Consider three companies: Company "F" is in the food business running a nation-wide chain of food supermarkets. Company "H" is in the hospitality business owning and operating a nation-wide chain of hotels. Company "C" is a major manufacturer of both men and women clothing. Reflect on the nature of the business of these three companies. You are recommended to also get to the web site of one company in each of these categories - choose a company whose name you are familiar with in each category and browse through its web site to learn about its operations and 'products'. You might also check what the beta of each of these companies is.
2. Upon reviewing the nature of the operations of the companies including the nature of their customers and products, what would you recommend should the capital structure (total liabilities or debt and equity proportions) be for each of the three companies? Note that you are not asked to provide specific numbers, just 'low debt ratio', 'medium debt ratio' or 'high debt ratio'. (Do not quote the actual company's capital structure or their debt-to-equity ratios as per their balance sheet.)
3. Also provide some explanations as to what you think the OPERATING or the ASSET BETA of each of the three companies might be, and why.
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Solution Summary
The solution selects three companies from websites and compares their betas followed by discussion about reasons and results.
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Optimal Capital of a firm
1. Consider three companies: Company "F" is in the food business running a nation-wide chain of food supermarkets. Company "H" is in the hospitality business owning and operating a nation-wide chain of hotels. Company "C" is a major manufacturer of both men and women clothing. Reflect on the nature of the business of these three companies. You are recommended to also get to the web site of one company in each of these categories - choose a company whose name you are familiar with in each category and browse through its web site to learn about its operations and 'products'. You might also check what the beta of each of these companies is.
Company F is Kruger Co. This is an American retail food supermarket. It is the second largest grocery retailer in the country. Its products are bakery, beer, diary, frozen foods, liquor, meat, seafood, wine, farm produce, banking and pharmacy. The beta for Kruger is 0.93. .
Company H is InterContinental Hotels Group. It operates hotels under different ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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