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1. Slide:01 Title: Understanding Leverage and Capital Structure Subtitle: A Guide to Financial Decision Making Sukanta Das ID:1008,46 th Batch 2 nd SEMESTER,EMBA Managerial Finance University of Science and Technology Ctg.(USTC)

2. Slide:02 Introduction to Leverage- Definition of Leverage: The use of debt (borrowed funds) to increase the potential return on investment. Importance of Leverage in Financial Decision Making: Leverage amplifies both potential gains and losses, making it crucial for strategic financial planning. Types of Leverage: Operating Leverage: Fixed operating costs that magnify the effect of changes in sales on a company's earnings. Financial Leverage: The use of debt financing to increase the returns to shareholders. Combined Leverage: The combined effect of operating and financial leverage on a company's earnings.

3. Slide:03 Capital Structure Basics- Definition of Capital Structure: The mix of a company's long-term financing, including equity, debt, and hybrid securities. Components of Capital Structure: Equity: Ownership interest in a company, representing shareholders' claims to the company's assets. Debt: Funds borrowed by a company that must be repaid over time, typically with interest. Hybrid Securities: Securities with characteristics of both debt and equity, such as convertible bonds or preferred stock. Factors Influencing Capital Structure Decisions: - Business Risk - Tax Considerations - Financial Flexibility - Cost of Capital

4. Slide:04 Leverage and Risk Relationship Between Leverage and Risk: Higher leverage generally increases both potential returns and risks. Impact of Leverage on Profitability and Returns: Leverage can amplify profits in favorable conditions but can also lead to significant losses during downturns. Example of High vs. Low Leverage Companies: High Leverage: Companies with high debt-to-equity ratios may experience higher profitability during good times but face greater risk of bankruptcy during economic downturns. Low Leverage: Companies with low debt levels may have lower profitability but are less susceptible to financial distress.

5. Slide:05 Capital Structure Optimization Finding the Optimal Capital Structure : Balancing the benefits of debt (tax shields, lower cost of capital) with the risks (financial distress, agency costs). Trade-offs Between Debt and Equity: Debt offers tax advantages and lower cost of capital but increases financial risk, while equity provides flexibility but dilutes ownership.

6. Slide:06 Conclusion- Summary of Key Points: Understanding leverage and capital structure is essential for making informed financial decisions and managing risk effectively. Importance of Understanding Leverage and Capital Structure: Proper capital structure management can enhance shareholder value and improve a company's overall financial health. Future Implications and Considerations: As market conditions change, companies must regularly reassess their capital structure to maintain financial stability and adapt to new challenges. THANK YOU