Case study

Proposing an Optimal Capital Structure to Maximize Returns

optimal capital structure


Business Situation

  • Our client wanted us to propose an optimal capital structure in order to realize the best value on an investment.
  • The aim of the exercise was to access the flexibility, profitability, solvency, conservatism, and control of the capital structure in the company.

SGA Support

  • Examined the dual mode of financing and explored the relative advantages for each.
  • Tried to understand if the firm’s debt/equity ratio is lower or higher than other firms at the same industry and if the firm’s current debt/equity ratio explained by the firm’s financial policy or by the current market conditions.
  • Presented the current business structure of the firm and analyzed the existing leverage, credit ratings, EBITDA levels, planned CaPex, and debt levels to determine the optimal capital structure.
  • Performed sensitivity analysis with variations in relevant financial parameters including cash flow, interest rate, EBITDA, etc. to account for different scenarios.

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