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Traditional Approach- Capital Structure Theory (in Hindi)
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Heena Malhotra
Believe in Conceptual Learning.

Unacademy user
but sir ....ek dout hai .... ...judicial review ...then ... I mean ki .... parliament Jo bhi law ....baanti hai ...uska judicial review toh ...hota ha to check .....the law than actually am getting confuse for judicial review wala concept ?
Prashant Thakur
3 months ago
Judicial Review is mentioned under Article-13..It says that any law enacted by State (Central Level Legislature+ State Level Legislature) , IF VIOLATES FUNDAMENTAL RIGHTS , shall be declared VOID by Supreme Court/ High Court.
mam can you please provide the word or ppt files as its reallly time takinfg to make notes
David Maluka
5 months ago
upscdilip@gmail.com
Ma'am, do we have practical questions based on these capital structure theories formulae or just have to memorise formulae?? @heena malhotra
Heena Malhotra
7 months ago
You just have to memorise formulas.
Rachna Poddar
2 months ago
Thank you😊😊😊Superb explanation by you.. Every concept is simply made interesting ...I can't describe to the level of amazing work you did ma'am ...You are doing great job😍😍😍💞@Heena Malhotra
thanku thanku mam aapne capital structure chapter bhut ache se krvaya....maine phle bbhut kosis ki ye chapter. samjhne ki lekin ye lgta tha ki mujhe ye chapter kbi nhi smjh aa skta.....but now aapki video dekhne k baad bhut help mili aur ...itne ache se smjh aa gaya ....ki m kbi bul nhi skti....thanku thanku
Heena Malhotra
10 months ago
Thank you so much Neeru for such a kind words. Comments like these make my day. I hope in future too i will able to give my learner's more knowledge. Thank you once again. ☺️☺️
thnx mam, can you suggest me which is the book best for FM numerical
Heena Malhotra
9 months ago
If you asking from Net prespective then I have added test series which has numericals. If you are asking for your master's then you can try Kalyani publication book. and you can try ICAI study material too :)
Pawan Kumar
9 months ago
thnx mam
mam noi and traditional approach k kuch assumption nhi Hain ?
Heena Malhotra
10 months ago
Video No-15 m jo assumptions discuss ki gyi h wo ni, noi, aur traditional approach teeno ki assumptions hai.. Check out video no 15. ☺️
Chinmaya sahu
10 months ago
yaa but jaise ni k separately the ki ke and kd are constant and with increased use of debt ...wacc decrease waisa type...noi and traditional k separately
Heena Malhotra
10 months ago
hai, aur har theory ke saath discuss ki gyi h aur btaya bhi gya h ki wo imp h.. ☺️
Chinmaya sahu
10 months ago
kk tysm maam
Heena Malhotra
10 months ago
Welcome har ek theory ka most important part ke, kd aur Ko m relationship hi h ☺️
Reeta Sharma
10 months ago
ur teaching style nd explain methods too good thanku mam
Heena Malhotra
10 months ago
Welcome Reeta :) and thankyou :)
  1. Capital Structure Decision By Heena Malhotra


  2. Net Income (NI) Approach Traditional Approach Net Operating Income Capital Structure Relevance Theory Capital Structure Theories Capital Structure Irrelevance (NOI) Approach Theory Modigliani-Miller (MM) Approach By Heena Malhotra


  3. Net Income (NI) Approach o Ke and Kd are assumed not to change with leverage. As debt increases, it causes weighted average cost of capital (WACC) to decrease. By Heena Malhotra


  4. Net Operating Income Approach (NOI) K. Cost of Capital K, Leverage (Degree) 0 The above diagram shows that K, (Overall capitalisation rate) and (debt- capitalisation rate) are constant and K, (Cost of equity) increases with leverage. By Heena Malhotra


  5. The value of the firm on the basis of Net Income Approach can be ascertained as follows: Value of Firm (V) SD Where, V Value of the firm S Market value of equity D Market value of debt NI Market value of equity (S) Ke Where, NI Earnings available for equity shareholders K. Equity Capitalisation rate By Heena Malhotra


  6. EBIT veall ost apal-ale othem Thus according to this approach, the firm can increase its total value by decreasing its overall cost of capital through increasing the degree of leverage. The significant conclusion of this approach is that it pleads for the fim to employ as much debt as possible to maximise its value. By Heena Malhotra


  7. Net Operating Income Approach (NOi) o V-EBIT/Ko O S V-D O Ke-Earning available to equity/Shareholder's Value By Heena Malhotra


  8. Amita Ltd's operating income is 5,00,000. The firm's cost of debt is 10% and currently the firm employs? 15,00,000 of debt. The overall cost of capital of the firm is 15%. You are required to determine: (i) Total value of the firm. (i) Cost of equity. (i) Statement showing value of the firm Net operating income/EBIT Less: Interest on debentures (10% of Earnings available for equity holders Total cost of capital (Ko) (given) Value of the firm V 5,00,000 (1,50,000) 3,50,000 15% 15,00,000) EBIT 5,00,000 Ko 0.15 33,33,333


  9. (ii) Calculation of cost of equity 15,00,000 Market value of debt (D) Market value of equity (s) S V- D 33,33,333- 15,00,000 18,33,333 Earnings available for equity holders Value of equity (S) EBIT Interest paid on debt 3,50,000 Market value of equity 18,33,33.3 19.09% By Heena Malhotra


  10. Net Income (NI) Approach Traditional Approach Net Operating Income Capital Structure Relevance Theory Capital Structure Theories Capital Structure Irrelevance (NOI) Approach Theory Modigliani-Miller (MM) Approach By Heena Malhotra


  11. Traditional Approach o Beyond a particular point, the cost of equity increases because increased debt increases the financial risk of equity shareholders. structure is offset by increased cost of equity. equity can not be offset by the advantage of low cost debt. O The advantages of cheaper debt at this point of capital o After this there comes a stage, when increased cost of By Heena Malhotra


  12. Net Income (NI) Approach Traditional Approach Net Operating Income Capital Structure Relevance Theory Capital Structure Theories Capital Structure Irrelevance (NOI) Approach Theory Modigliani-Miller (MM) Approach By Heena Malhotra