COST OF CAPITAL FOR UK BASED FIRMS & ITS RELATIONSHIP WITH CERTAIN RATIOS

Abstract

Capital structure has been one of the most talked about issue in today’s business world. The decision solely rests on leverage financial manager has in its portfolio to accommodate debt or equity in its capital structure. There have been many theories that talks about the choice of relevant capital structure but nobody has been able to define any set fixed pattern. With the motive to analyze cost of capital for different firms related to various industries, 6 firms from each industry has been chosen to make sure they represent adequately all the firms in the industry. Cost of capital for these firms has been calculated and effort has been made to takeout the factors that help determine optimal capital structure of the firm. It was not possible to analyze the data of all the firms and cover every industry so industry has been chosen keeping in view its contribution to the overall economy on the basis of information provided by UK authorities. The research would provide the managers the tools to choose between different project financing options being in different industry and would help analyze its consequences.