- CFA Exams
- 2021 Level II
- Study Session 7. Corporate Finance (1)
- Reading 20. Capital Structure
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Learning Outcome Statements PDF Download
| 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. |
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