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Is minimizing WACC by having a largely debt-based capital structure a high-risk strategy?
Wiki User
∙ 18y ago
Yes, the higher the % of assets financed with debt, the higher the risk of financial ruin. Why? You can skip a dividend to an owner (maintanence on equity), but you can not skip an interest payment (maintenance on debt). Mix depends on stability of Company's operating cash flows.
Wiki User
∙ 18y ago
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Is minimizing weighted average cost of capital by having a largely debt-based capital structure a high-risk strategy given the threat of bankruptcy in an over leveraged business?
Yes. All of the items in your question denote a high-risk strategy. "Largely debet-based capital structure", "given the threat of bankruptcy", overleveraged business". Minimizing the weighted average cost of capitol is simply an accounting tool and is not a strategy and so has no impact on the risks involved in operating a business. Yes, try and keep that debt down.
How can you apply financial management strategy?
what is Financial Management Strategy
Advantages and disadvantages of strategy?
One advantage to having a business strategy is knowing what direction your company is headed. A disadvantage to having a business strategy is the fact that your strategy could be wrong for the industry.
Case problem lawsuit defense strategy?
Case Study : Lawsuit Defense Strategy
How do line managers become owners of the strategy?
by participating in its development and understanding how the resulting strategy was determined.
Is minimizing weighted average cost of capital by having a largely debt-based capital structure a high-risk strategy given the threat of bankruptcy in an over leveraged business?
Yes. All of the items in your question denote a high-risk strategy. "Largely debet-based capital structure", "given the threat of bankruptcy", overleveraged business". Minimizing the weighted average cost of capitol is simply an accounting tool and is not a strategy and so has no impact on the risks involved in operating a business. Yes, try and keep that debt down.
What is the most important pricing strategy for a perfectly competitive firm?
Minimizing cost
What is strategy-structure fit?
It is the measure of compatibility between the strategy that the organization has chosen to pursue and the structure of the organization pertaining to implementing the strategy, Is the organization structured properly to implement the strategy? If 'Yes', strategy-structure fit is good.
Should our strategy follow the organizational structure or organizational structure follow the strategy?
the latter! Organisation is developed to implement stategy
Relationship between an organization's strategy and structure?
hi - bye - fly -the best strategy
What is the pricing structure of Adidas?
It is a pricing strategy
What is skill based structure?
how does skill-based structure support a customer centered strategy
Induced strategic behavior?
Induced strategic behavior is a top-down process that link current strategy and structure to create innovation intertwined with that strategy and structure. This form of venturing filters strategy a structural hierarchy and results in internal innovation that is highly consistent with the firm's current strategy.
Relationship between organizational structure and strategy implementation?
Organizational structure and strategy are related because organizational strategy helps a company define and build its organizational structure. A company's organizational structure is based on the result of the analysis of organizational strategy. The company will use these results to determine its areas of concentration and how to position itself in order to succeed. The relationship between organizational structure and strategy becomes clearer when the company's strategy is in place. With a clear focus of what it wants to achieve, the organization will proceed to align its structure in such a manner to best achieve this. It will allocate responsibilities for optimal results, create branches, and decide whether individual efforts or group participation is the best method for it to achieve its goals. The organizational structure and strategy will also help the company decide if the tone of the company should be strictly formal, semi-formal or informal. All of these decisions can be made after determining the organizational strategy of the company.
How does strategy affect structure?
Strategy affects structure because you have to know how you are going to go at something before it can be accomplished. Structure is a very important feature to have.
Explain why organizational structure is so important in strategy implementation?
hnghhgh
When the organization changes its mission culture goals strategy and structure it has?
Transformational Change
