Limiting business risk exposure to reasonable limits

Subject: Consumer Behavior

Paper Model: APA

Paper Type: Business Plan

Total Words: 4950

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Recommendations:

Short term external financing

Compliance with the norms of lenders and credit rating agencies


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Researcher’s view point indicate that firm with growth opportunities in UKs retail and wholesale markets have mix affects regarding the potential influence of  growth opportunities on capital structuring. Some firm are raising more capital ac compare to other. Business risk is another factor, which reduce the capital flow to the company. Shareholders and financial institutions are reluctant to invest and lend for the company. All previous studies analyzed in the research are agreed upon the statement. Researchers believe that high level of business risk prevent the shareholders and financial institutions to invest in the company. They perceive that it would be difficult for the company to recover the cost. Results indicate that firms with high business risk in UK’s retail and wholesale market have less outside capital flow. Business risk prevent the shareholders to invest in those companies in retailing industry who are involved in risky projects or those projects which takes time to generate revenues and provide return on investment. Non-debt tax shield is used to avoid corporate tax. Previous research findings indicate that those companies who utilize non-debt tax shield have less amount of capital.

            Similarly, there are studies that negated the concept and argued that, although non-debt tax shield reduce corporate tax, however, capital structuring is not affected by the move. Liquidity conditions of the firm strengthen the capital structuring of the firms. All of the studies analyzed to explore the argument were in favor of the study. Liquidity as a firm level characteristic prevails in the UK’s retail and wholesale industry. Those firms in the industry who have good liquidity conditions in terms of assets readily available to liquidate have good capital structuring. These assets include land, machinery, raw materials and other major supplies. Firm with high liquidity condition in the industry are in position to liquidate the assets in current financial crisis.

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