Capital Structure (2022 Level II CFA® Exam – Reading 15)

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Topic 3 – Corporate Issuers
Reading 15 – Capital Structure
0:00 Introduction and Learning Outcome Statements
7:26 Explain the Modigliani-Miller propositions regarding capital structure, including the effects of leverage, taxes, financial distress, agency costs, and asymmetric information on a company’s cost of equity, cost of capital, and optimal capital structure;
43:02 Describe target capital structure and explain why a company’s actual capital structure may fluctuate around its target;
45:30 Describe the role of debt ratings in capital structure policy;
47:43 Explain factors an analyst should consider in evaluating the effect of capital structure policy on valuation;
49:59 Describe international differences in the use of financial leverage, factors that explain these differences, and implications of these differences for investment analysis.