Essay Capital Structure and the Corporate Life-Cycle Report Writing – Management Assignment Help

Assignment Task:

Question:

This task is to prepare a management report based on capital structure and the corporate lifecycle, following the instructions below:

Prepare a short report in which you:

1. Compare and contrast the typical capital structure for companies across the following industries: financial (banking), technology (software), airlines (air transport), and retail (general, excluding online).

2. Critically evaluate how the stage of the corporate lifecycle can influence (or limit) the choices of finance and, therefore, a firm’s capital structure.

Required length: 1,000 to 1,200 words in a report style submission. Harvard style referencing is required. While we expect you to present your own opinion and your own ideas, we encourage you also to base your analysis on statistical data and opinions of analysts and researchers, as well as any industry or company releases or reports that you may have reviewed.
  
Capital structure in corporate finance is the way a corporation finances its assets through some combination of equity, debt, or hybrid securities

Financial (Banking)
In the banking sector, we find it a bit different than other entities as banks depend on “deposits” and not just Debt or equity to structure their capital, as explained by……… “Banks’ capital structure fundamentally differs from one of the non-financial firms, since it includes deposits, a source of financing generally not available to firms.”. Also, banking services solely depend on the investment of the money deposited or earned from their customers. As explained by “Commercial banks have deposits that are insured to protect depositors and to ensure financial stability.” People deposit their money and expect interest return where banks gain from investing these deposits and collect their own profits. So, funding these banks come from people and banks are fully dependent on depositors. 
 
Technology (Software):
In technology and in particular software, dependency on funding depending on the technology itself. Software developers depend on the need of the service and do the engineering towards it to establish. Its capital structure rely on the investor or owner of that software and then work on selling its license or provide day to day service. When the software (service) is extremely productive, investors do compete on owning that software where they can put high funds in it for the service. Basically, Technology capital structure solely depends on the developer and investor of that software and then rely on the sales of the licenses and services provided.  

Airlines (Air transport):
The air transport business or companies, where operation costs are tremendous and high, capital structure solely depends on the sales and cash inflow in order to ensure the sustainability of operations. As stated in “the results of the study showed that profit, size, leasing policies, ownership, and difference of return and average return (study period) are the determinants the capital structure in the airline industry”, it shows that capital structuring in the air transport business could be misleading or confusing as it depends on several factors. In my opinion, air transport companies have a lot of operational costs that need to be covered on a daily basis. This will lead to a huge start of an investment from debt and equity that is usually supported (if not owned) by governments with bigger sources of income. Then, and depending on the sales and returns, it pays off its debt and sustains the strength of its share in the market to give stronger equity and dividends to its investors. “Many of the selected airline companies strongly depend on the retained earnings for financing the needs.”

Retail (General, Excluding Online)
Retail, in general, depends on the capital put from the investor/s. usually, a budget will be set for all the expenses related and build a margin against it. Sometimes governmental regulations do influence that pricing and put a cap on the return. Also, depending on the business itself, there might be support from the government whether as cash or ease of processes and eliminating of some law regulations. For example, in Saudi Arabia, people get financial support from the government when they are out of jobs and have a business idea they are implementing. 

In summary, capital structure of a business has to be carefully reviewed as there are no optimal structure that will work for any particular business. The use of previous data collected and intelligence information on how the business run will give a clearer picture of how the investment must be structured.