PRACTICE OF MODELING THE TARGET CAPITAL STRUCTURE OF THE CORPORATION
Author(s): Brodunov Andrey Nikolaevich
Release: 2020-1 (32)
Keywords: Equity, debt capital, target capital structure, operating profit, financial difficulties
Annotation: Even though the theory of corporate Finance describes many models for optimizing the capital structure, most of them remain “theoretical”, due to many restrictions that make it difficult to apply them in the practical activities of corporate managers. In this paper, we have set a goal to illustrate the possibilities of forming a target structure of the Corporation’s funding sources, based on the method of operating profit variability. The article deals with theoretical and practical aspects of modeling the target capital structure of corporations by the method of operating profit variability. The paper describes the theoretical basis for practical testing of the viability of the proposed method of structuring the Corporation’s capital. In the practical part, several sequential calculations were performed, and the algorithm for applying the proposed method was demonstrated. Based on the data of the real financial swelling of the Corporation, which has the conditional name of JSC “Techmash”, the breaking points were calculated and analyzed, the probability of failure of a credit institution to provide loans to the Corporation was determined by the methods of determining the credit rating using the five-factor model of E. Altman, the average growth rate of assets and revenue was compared and analyzed. The coverage ratio is calculated, as well as the credit rating and borrowing rates of the analyzed Corporation are correlated. The maximum probability of financial difficulties is calculated.
Bibliography: Brodunov AN.NI. PRACTICE OF MODELING THE TARGET CAPITAL STRUCTURE OF THE CORPORATION // Economics and Management. – 2020. – № 1 (32). – С. 87-95. doi: 10.21777/2587-554X-2020-1-87-95