TABLE OF CONTENTS
1.1 Background of he study
1.2 Statement of the problem
1.3 Objective of he study
1.4 Research question
1.5 Research hypothesis
1.6 Significant f the study
1.7 Scope and limitation
1.8 Definition of terms
CHAPTER TWO Literature review
2.1 background of the company under study
2.2 The concept of financial leverage
2.3 The degree of financial leverage
2.4 The effects of financial leverage
2.5 Business risk
CHAPTER THREE Research design and methodology
3.1 Research design
3.2 Population of he study
3.3 Sample and sampling techniques
3.4 Source of data collection
3.5 Method of data collection
3.6 Method of data presentation
3.7 Method of data analysis
CHAPTER FOUR Presentation and analysis of data CHAPTER FIVE
The project topic “Effect of financial leverage on company performance”, has to do with the use of external finds (dept and equity) in generating profit for their firm company which its primary aim is maximization of shareholder welfare, wealth and also profit.
I shall make use of primary data, a questionnaires which will be drafted (to be presented for onward approval) and interviews.
I shall lay hand on books, management journals and periodical. However, the rudiments of the study will be considered, also a general overview of the effects of using dept and equity as a source of financial to Nigeria bottling of financing as mentioned above generated heated debates, I shall touch on it.
The study will critically analyses the possible effects of financial leverage on the performance of companies by trying to establish a relationship between the level debt carried by firms and their level of performance given debt carried by firs and their level of performance given economic conditions that prevail during the time of my research.
I shall take a backward book on the company performances from 2000-003 to ascertain the ratio analysis and also know the graphical behaviour. The financial structures of he companies under study from 200-200 will be put under consideration.
I shall apply Regression and correlation analysis methods to measure the average amount of a change in one variable that is associated with until increase or decrease in amount of another variable.
Correlation stands there to test the efficiency of he Regression with respect of he company under study This research work will be made-up of five chapters. I can only comment on chapter one for now (other chapters will be) formulated and presented in due (course).
Chapter one: The introductory chapter, deals with background of the study, purpose and scope of he study, statement of hypothesis, significance of he study, limitation of he study and definition of terms
Finally, the findings, recommendation and conclusion.
1.1 BACKGROUND OF THE STUDY
Firms at every stage of growth and development, from concept to maturity need found in order to survive. The aim of every business is to maximize the wealth and welfare of its owners.
Without finance, the aim of every business cannot be met. This finance can be said to be the life wire of any firm without which there can be no survive
Financing is the acquisition of cash or other assets through means such is the sale of stocks, retaining net profit and increasing of dept. A firm’s capitalization consists of internally generated founds and due to the fact that a company may not be able to rise al the founds which it requires internally, it may depends on additional external financing.
This capitalization of the firm would therefore incorporate both internally generated founds and external found which comprises loons both short terms and long terms and bonds.
Financial leverage, the subject matter of this study, has to do with the use of external, founds in generating profit for the firm which is primarily the maximization of shareholders wealth and welfare. Leverage invalids the use of external financing to act as qa higher than could be reached without its use. Usually, there exist varying financing structures. A simple common stock structure is one whereby no use is made common stock structure does not have the ability of enjoying the advantages of financing leverage. The use of financing leverage causes the financial structure of a firm being simple and also the impact the owners have on the firm increases by the issuing of common stuck whereas the claim creditors have on the firm increases with the use of borrowed founds.
Leverage therefore is greatly considered when investment is being undertaken by investors. By this investors prefer a firm that is less levered than one that is highly levered.
However, the level of activity that can take place in a firm depends on the level of activity that goes on in the economy. The economy has a direst effect on the activity of the firm and as such firms with debt financing also.
1.2 STATEMENT OF THE PROBLEM
Companies that use dept and equity as a source of financing are bound to face some ups and downs. The Nigeria Bottling PLC tend to face:
i) At some point in time there exist indiscriminate issue of common shares to the general public, to this background, it result in the dilution of corporate control. This is usually the case, if there are no pre-emptive rights entrenched in the regulation of the company.
ii) The use of order dept instruments and common stock give the new common stock owners the right to enjoy the same source of profit as the long standing holders of common stock in the organization. This is unfair to the existing shareholders, who have toiled over the years with the firm.
iii) Dividend payment to the owners of the equity are not a tax deductible expense. To (Nigeria Bottling Company) dept instrument were used for financing, to this effect, interest payment on such instruments should be tax deductible.
iv) Excessive use of dept and equity might result in over categorization of the firm hence a decline in the further earnings
v) Indiscriminate use of dept and equity as a source of financing eliminates the benefits of trading on equity.
vi) The cost of floating new issues is often very prohibitive, the founds expended in investigation and underwriting stock and dept is for in access of the cost used in issuing dept instruments.
1.3 OBJECTIVE OF THE STUDY
The objective of the study includes the following:
1. To analysing the possible effects of financing leverage on the performance of the company.
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