Why is it important to have an Optimal Capital Structure?
An optimal Capital structure requires both Debt Funding and Equity Funding and is used in order to create value over the short, medium and long term for its Shareholders. Shareholders want to see growth and high profits. The return on Equity will increase as long as your EBIAT (Earnings before interest, after tax) as a percentage of total assets is greater than your after tax cost of debt. To much debt raises the required return expected by shareholders and this therefore increases your weighted average cost of capital. The optimal capital mix is required in order to keep the weighted average cost of capital as low as possible but at the same time maximizing profits.
What is the Accounting Equation and on what side of the T-Account in the General Ledger do each of the building blocks of the Financial Statements Increase?
Assets = Owners Equity + Liabilities Assets increase on the Debit Side (Left side) Liabilities increase on the Credit Side (Right Side) Income increases on the Credit Side (Right Side) Capital increases on the Credit Side (Right Side) Expenses increase on the Debit Side (Left Side)
What are the Six Capitals that are used in a Company's Integrated Report, and give an example of each as to how they can be used to demonstrate non-financial Performance Indicators for a mining company?
These are the following Six Capitals and can be used in the following ways to demonstrate non-financial Performance Indicators for a mining company: Human Capital: Employee Turnover Rate Intellectual Capital: Amount of Accredited courses completed by Employees Manufacturing capital: % change in Mining Equipment Efficiences year on year Financial Capital: % change in amount of debt funders obtained year on year Social and Relationship Capital: Number of calls received to whistle blower line Natural Capital: % change in amount of CO2 Emissions year on year