This CPE course explores capital structure and the impact to a business as a result of a change in capital structure. It reflects on traditional views of gearing, and reports on US economists Modigliani and Miller’s challenge of that view. It recommends adjustments to M & M’s theories based on real world capital structures, and examines how companies and groups of companies structure debt. The course also investigates how shareholder wealth is affected by a company’s dividend policy, and examines those policies in practice.
▪ Recognize the impact of changes in capital structure for an incorporated entity on shareholders and other stakeholders, including identifying capital structure theories (traditional theory, Modigliani and Miller (MM)’s theories with and without tax and practical considerations and calculations using MM formula)
▪ Calculate cost of equity or weighted average cost of capital (WACC) to reflect a change in capital structure
▪ Identify and compare alternative dividend policies, and their impact on shareholders and entity performance measures
▪ Identify and compare alternatives to cash dividends, such as scrip dividends and share repurchase programs, and their impact on shareholders and entity performance measures
▪ Capital structure theories
▪ Calculation of cost of equity or weighted average cost of capital (WACC) to reflect a change in capital structure
▪ Structuring the debt/equity profile of group companies, including tax implications and thin capitalization rules
▪ Impact of scrip dividends on shareholder value and entity value/financial statements/performance measures
▪ Impact of share repurchase programs on shareholder value and entity value/financial statements/performance measures
▪ Implications for shareholder value of alternative dividend policies including Modigliani and Miller’s theory of dividend irrelevancy
▪ Development of appropriate dividend policy taking into account the interests of shareholders and the cash needs of the entity
CGMA exam candidates
Management accountants wanting to develop skills in corporate financial strategy and implementation.
Management accounting experience or the equivalent.