AFM: Concepts and Practice · Part C: Financial Management

Chapter 18: Capital structure and the cost of capital

How a company mixes debt and equity, what each rupee of it costs, and how a lender reads the risk that debt adds.

Buyers of the e-book, or of the print copy, which includes it, read the whole chapter. Everyone can read the free sample, pages 1 to 24 of the e-book.

In this chapter

• 18.1Capital structure theoriesp. 241
• 18.2Leverage: DOL, DFL, DCLp. 242
• 18.3EBIT–EPS and the lenderp. 243
• 18.4Debt and preferencep. 244
• 18.5Equity and the WACCp. 245
• Exam traps and quick checksp. 246
• Practice: 16 questions in three roundsp. 247
• Answers, with every wrong option explainedp. 249
• Make it stickp. 251
• Chapter 18 on one pagep. 252

Corrections and updates

None for this chapter so far. Every correction to the book, and any rule that changes after its date, is listed on the errata page.