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What would you recommend capital structure be for General Dynamics, Sprint and Dell.
Should they be low debt ratio, medium debt ration or high debt ratio? Be specific and incorporate why customers each company has and other current events that correspond to the recommended capital structure and recommended debt ratio for each company. Don't lump the discussion into one. Each area should be addressed for each company separately.
This should be done in a full page and a half, single spaced.
General Dynamics Corporation is a US based company that is a conglomerate and makes products related to defense. It is takes up defense contracts anywhere in the world. It sells products related to combat systems, information/technology systems, marine systems, and aerospace products. The company is well known for making F-16 Fighting Falcon jet fighters. The company is essentially a conglomerate and performs through strategic takeovers and divestitures. The total debt to equity ratio of the company is 32.97 and the industry total debt to equity ratio is 55.38. This means that the company is less leveraged than the industry average. The return on investment for General Dynamics is 12.92 whereas, the industry average is 8.35. In theory, if the General Dynamics can get debt at an interest cost lower than 12.92 it can go in for profitable borrowing. This means that General Dynamics can earn at a higher rate of return than the interest rate at which it borrows. The current return on equity for General Dynamics is 20.28% whereas the industry average is 13.01. In other words General Dynamics has the opportunity of increasing its debt to industry average, which is 55.38 percent and can enjoy profitable borrowing. This suggested structure is based purely on financial ...
Capital Structure is discussed in great detail in this solution.
Consider Three Companies: General Dynamics, Sprint, and Dell
Consider three companies: General Dynamics, Sprint, and Dell. 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. You might also check what the beta of each of these companies is.
Based on the readings of the Module, and 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).
Please explain your recommendations for each of these three companies. Consider the nature of their business, the riskiness of the company, and the advantages and disadvantages of debt over equity financing in your answers.View Full Posting Details