The capital structure decision and the cost of capital Research Paper

The capital structure decision and the cost of capital - Research Paper Example Thus a lesser D/E ratio would be recommended for a typical company. Therefore, D/E ratio = aggregate liabilities/ shareholders’ equity A very high D/E ratio would translate to the fact that the company has been applying debt in its growth to a high extent. The resultant impact is a scenario of very volatile earnings by the company due to the marginal interest expense. If a company applied a lot of debt financing to finance additional business operations, this would result to more generation of revenues and if the revenues outdo the costs, then the shareholders would be left better of since they would earn more dividends. But it is essential to note that this is if, and only if, the earnings surpass the cost of debt. D/E ratios may also vary depending upon the industry the company is operating. For instance, a company that is highly capital intensive would have a higher D/E ratio than those who operate computer software operations. (Gibson, 2008 p260) MATTEL Mattel is a premier company for toys. It designs, manufactures as well as markets toys. The Company’s believes that PLAY is vital for the development of Children besides other benefits. These include the development of imagination and creativity, good healthy interaction and the construction of strong learning foundation among others. Most of Mattel’s business is done online. ... They say their business is global and thus, internationalized and have subsidiaries besides the parent company which is registered in the US. (mattel.com, 2011) Mattel’s gross sales are formed up as follows: 30% in Latin America, 52% in Europe, 11% in Asia Pacific and 7% in others areas. They manufacture toy products themselves as well as outsourcing from other companies. Their main manufacturing facilities are set up in Indonesia, China, Malaysia, Thailand and Mexico. Their business is also seasonal where they experience peaks during the traditionally set holiday seasons. In fact the biggest sale revenues are experienced in the 3rd and 4th quarters of their fiscal year. The risks facing Mattel are only based on non-satisfaction of clients since its business depends almost entirely on Toy business. Shifts in demand would, therefore, impact adversely on their business. Seasonality as mentioned earlier is also another risk as well as inaccurate anticipation of the trends and cul ture. Though no market beta is given on this website, it is stated in their 2010 financial reports that the business is highly dependent on market behavior, where it faces to a large extent both foreign and local market rates of interest variances that form up market financial risk. (files.shareholder.com, 2011) Mattel Company had a market beta of 1.0 as reported by smartmoney.com website as of 2011. (smartmoney.com, 2011) Due to the high levels of financial risks that Mattel as a company faces and its doing business world wide, usage of debt as a source of capital would have a very huge impact on the capitalization of the company. Therefore, the recommendation is

The Glenn Chasse Hotel Essay Example | Topics and Well Written Essays - 1500 words

The Glenn Chasse Hotel - Essay Example It also defines the obligations and rights of an employer towards an employee hence safeguarding rights and preventing violation of duties from both parties. Apart from the written contract there is also a formation of a psychological contract between the employer and the employee that represents their mutual beliefs and perceptions. It describes the promises and expectations of each of the parties during the time of recruitment. Feldhiem (1999)3 reflects these two strands by dividing the psychological contract into: Kate: She is the head house keeper and is quoted as "unfaunfamiliar with her new duties such as budgeting, training and discipline ". The smooth functioning of her department seems to be suffering due to this. She is not successful in appropriately training and guiding her staff as a consequence of which they are not familiar with her way of work. Harriet -Elspeth's assistant : Elspeth states that "good standards of casual staff are hard to find". If her statement is not influenced by personal bias, this is an indication that the recruitment process of the hotel is sub- standard and proper giudlines are not set for the employees. Harriet is not notified that it is not within her authoritative scope to "borrow" staff without notice. This prevents the smooth flow of hotel functions because crew( who again are not specific and sure of their job profiles) are not available at places where they are needed resulting in low turn over and uneven distribution of labor. Principle statements: The principle statement should be handed over to the employee within two months for job commencement. It essentially contains all the terms and conditions upon which the employment relationship has been formed which means all terms and conditions are agreeable to both employer and the employee. It plays a pivotal role in the regulation of human resources as well as sorting out legal issues which might arise in the course of the contract. The principle statement should clearly cite the employees exact job profile and all the tasks that come under his or her responsibility. It should also mention any extra tasks, which the employee is expected to do at times which might be paid/unpaid for. The salaries, incentives, deductions and addition allowances (where ever they are applicable) should be mentioned. The working hours and compensation for overtime should be specified along with number of paid holidays and sick leaves. The employee should be provided with all the rules, regulations and principles of the concerned organization to ensure discipline and also the terms and conditions for termination, grievance procedures and legal action. Specifying health and insurance coverage conditions is also important. Apart from the