“Your customer doesn’t care how much you know, until they know how much you Care”
– Damon Richards
Leverage & Capital Structure
A company’s balance sheet is the result of its financing and investment behaviour. Optimal leverage is the debt-asset ratio that allows a company to achieve the highest possible return without taking on excessive risk. BridgeCap helps clients understand and achieve the optimum leverage ratio that minimizes the cost of capital without acquiring a high possibility of default.
In delivering this solution, BridgeCap helps clients to:
- Find optimal leverage ratio
- Understand how cost of debt and cost of equity drive business financing and investment success
- Re-optimize their business capital structure and investment policy
- Realize what is optimal for shareholders and when
- Assess the impact of borrowing and to rebalance the sources and uses of funds
A business is operating efficiently if the profit on its uses of funds (assets) exceeds the cost of its sources of funds (liabilities).
On the asset side, firms need to find the right balance between the necessity to maintain an adequate cushion of liquidity, to cover ordinary operations and to face future downturns or scarcity of funding, and the need to invest for growth. Large cash holdings, while they provide protection they also generate low returns which depress overall profitability. Striking the right balance is critical to the success of your business.
On the liabilities side, businesses need to find the right balance between alternative sources of funds in order to optimize the capital structure and minimize cost of financing.
BridgeCap provides clients with a solution for exploring how varying market conditions affect:
- the trade-off between the necessity to maintain an adequate cushion of liquidity and the need to invest for growth, on the asset side; and
- the optimal balance between alternative sources of funds, on the liabilities side.