ACCAspace
Provided by
ACCA Research Institute
ACCA P4
Advanced Financial Management (AFM)
高级财务管理
ACCA Lecturer: Lily Wang
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com
, P4 Chapter 5 Content
1 The financial system
2 The basic long-term financing decision
3 Agency effects
4 Specific financing options
5 Analysis of Comprehensive Example
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 2
, Chapter Summary
Capital structure
Key considerations
• Ongoing servicing costs
• Issue costs
• Gearing
• Optimal capital structure
• Availability
• Tax
• Flexibility
Theory • Cash flow profile
• Traditional theory-find • Risk profile
the optimal gearing level • Covenants
• MM with tax-gear up
as much as possible Agency theory
Pracitice
• Bankruptcy risk changes • Static trade-off
MM to give similar result • Pecking order
to traditional • Compromise
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 3
, 1.The financial system
It is important to understand the financial system before we look
at special financing options:
The financial system
Financial Assets
Financial Markets Financial Institions
And Liabilities
Capital Markets Money Markets
(>1 Year) (>1 Year)
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 4
Provided by
ACCA Research Institute
ACCA P4
Advanced Financial Management (AFM)
高级财务管理
ACCA Lecturer: Lily Wang
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com
, P4 Chapter 5 Content
1 The financial system
2 The basic long-term financing decision
3 Agency effects
4 Specific financing options
5 Analysis of Comprehensive Example
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 2
, Chapter Summary
Capital structure
Key considerations
• Ongoing servicing costs
• Issue costs
• Gearing
• Optimal capital structure
• Availability
• Tax
• Flexibility
Theory • Cash flow profile
• Traditional theory-find • Risk profile
the optimal gearing level • Covenants
• MM with tax-gear up
as much as possible Agency theory
Pracitice
• Bankruptcy risk changes • Static trade-off
MM to give similar result • Pecking order
to traditional • Compromise
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 3
, 1.The financial system
It is important to understand the financial system before we look
at special financing options:
The financial system
Financial Assets
Financial Markets Financial Institions
And Liabilities
Capital Markets Money Markets
(>1 Year) (>1 Year)
ACCAspace 中国ACCA特许公认会计师教育平台 Copyright © ACCAspace.com 4
