You are working for a large mutual fund company as a financial analyst. You have been asked

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You are working for a large mutual fund company as a financial analyst. You have been asked to review two competitive companies in the same industry. Both have similar cash flows and net earnings, but one has no debt in its capital structure while the other has a debt- to- equity ratio of 1.2. Based on this limited information, which company would you prefer?
Justify your conclusion. Would your preference be influenced by the companies’ industry?
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...
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Financial Accounting

ISBN: 978-1259103285

5th Canadian edition

Authors: Robert Libby, Patricia Libby, Daniel Short, George Kanaan, M

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