Issue №1, 2019

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Theoretical and practical aspects of capital structure management

E. A. Melay, Financial University under the Government of the Russian Federation (Financial University), Tula branch (Tula, Russia)

A. V. Sergeeva, Financial University under the Government of the Russian Federation (Financial University), Tula branch (Tula, Russia)

Full article 

DOI: 10.34130/2070-4992-2019-1-75-83

P. 75–83.

One of the indicators used in the financial management system of the organization is the «cost of capital». The breadth of the scope of application and the lack of a unified approach to the issue of expediency of capital structure management determined the relevance of the study. The paper summarizes the views of domestic and foreign scientists on the content of the category «cost of capital». It is noted that this indicator is considered as the cost of attracting and using capital, and as the return on capital. The authors emphasize the unity of scientists ' views on the definition of the cost of capital, but there is a significant difference in the valuation of its sources. Among the methods of assessing the value of equity, Gordon's method and the MSAR model, as well as their modifications, are most often used. As a basis for calculating the cost of borrowed capital in various sources, it is proposed to use the interest rate on the loan, the internal rate of return and the refinancing rate of the Central Bank of the Russian Federation. Modern financial management recognizes the importance of capital structure management. In particular, special attention is paid to the optimization of the capital structure on such criteria as return on equity, weighted average cost of capital, the target capital structure, the market value, financial profitability, financial risk. In the process of managing the capital structure, it is important to take into account many external and internal factors that can be divided into groups: institutional, legal, financial, economic, social and managerial. Factors that affect the capital structure at a given time can be taken into account when forming the target capital structure. The analysis of the capital structure of domestic organizations led to the conclusion about the formation of their capital structure in accordance with the goals and objectives in terms of acceptable risk and the required return. In conclusion, the article noted that decisions on the formation of the capital structure in practice are not paramount. The attention of managers is directed to the formation of a reasonable amount of borrowed funds, in which the financial risk is at a regulated level, financial flexibility and creditworthiness of the company is maintained.

Keywords: cost of capital, capital structure, equity, debt capital, weighted average cost of capital, capital structure optimization.

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For citation: Melay E. A., Sergeeva A. V. Theoretical and practical aspects of capital structure management. Corporate Governance and Innovative Economic Development of the North: Bulletin of the Research Center of Corporate Law, Management and Venture Capital of Syktyvkar State University, 2019, no. 1, pp. 75–83. DOI: 10.34130/2070-4992-2019-1-75-83 (In Russian).