Determine the Drivers of Capital Structure

UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS COLLEGE OF HUMANITIES SOCIAL SCIENCES MASTERS DEGREE OF BUSINESS ADMINISTRATION DIS 605 FINANCIAL SEMINAR MR NIXON OMORO STUDENT NAME REG NO KASEMBELI WALLACE AGENGA BENTER Section 1 Determine the drivers of capital The primary factors that influence a decision Company size Big firms are likely to be more leveraged than small This is due to the huge capital assets that they posses Management style Management style ranges from aggressive to Conservative management is less inclined to use debts to increase profits while an aggressive management may try to grow the firm quickly using significant amount of debt toraise up the growth of the companies earnings per tax exposure Debt payments are tax As if a tax rate is using debt as a means of financing a project is attractive because the tax deductibility of the debt payments protects some income from taxes Growth rate Firms that are in the growth stage of their cycle typically finance that growth through borrowing money to grow The conflict that arises with this method is that the revenues of growth firms are typically unstable and As a high debt load is usually not More stable and mature firms

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