- CFA Exams
- Dec. 2020 Level 2
- Study Session 7. Corporate Finance I
- Reading 20. Capital Structure
Reading 20. Capital Structure
Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Learning Outcome Statements
| Reading 20. Capital Structure | |
|---|---|
| 1. Capital structure irrelevance theory a. explain the Modigliani-Miller propositions regarding capital structure, including the effects of leverage, taxes, financial distress, agency costs, and asymmetric information on a company's cost of equity, cost of capital, and optimal capital structure; | |
| 2. Other capital structure theories a. explain the Modigliani-Miller propositions regarding capital structure, including the effects of leverage, taxes, financial distress, agency costs, and asymmetric information on a company's cost of equity, cost of capital, and optimal capital structure; | |
| 3. The static trade-off theory b. describe target capital structure and explain why a company's actual capital structure may fluctuate around its target; | |
| 4. Practical issues in capital structure policy c. describe the role of debt ratings in capital structure policy; d. explain factors an analyst should consider in evaluating the effect of capital structure policy on valuation; e. describe international differences in the use of financial leverage, factors that explain these differences, and implications of these differences for investment analysis. |