PepsiCo's Capital Structure Choices Essay Example | Topics and Well Written Essays - 3500 words

PepsiCos Capital Structure Choices - Essay Exampleo is used in the analysis of the financial statements and this helps analyze the protection that the company has available to the creditors (Samuels, Wilkes, & Brayshaw, 1995).A heights proportion generally expresses that the business has a high level of risk and this is brinyly because the company requires come across the principal and interest on its own obligation, without any external financing as the creditors are nonvoluntary to finance the company due to the high debt position. A lower proportion shows that the company is more financially stable and is in a better financial position to avail debt in the future.The net debt balance is a useful tool to bring out the current performance of the company and also helps the investors hit a clear idea of the financial standing of the company. Either too high net debt ratio or too low are both not acceptable. Here a ratio in a higher place 1.0 should be avoided as this clearly ind icates that the investors have a greater stake in the business (Bull, 2007). However, a ratio that is too low simply implies that the business is too conservative and not realizing its potential. The net debt ratio of the firm is found usingThe total debt of a company simply implies the overall combined repute of the current liabilities, long term liabilities and the capital liabilities (Chapman, Hopwood, & Shields, 2007). Although in close to theories the book value of the debt is considered, in reality, the securities industry value is normally taken into account. The market value of debt is generally more difficult to obtain since around firms do not keep their debts in the form of outstanding trading in the markets. In most cases companies tend to keep the debts in the form of book value (Clayman, Fridson, & Troughton, 2008).It is important to also understand present that use of book value can give mis-leading values as the actual values tycoon be significantly different. Using a book value can have three main mismeasurements. Firstly, it can have an impact on the cross sectional