Hunan Telecom Optimize The Capital Structure: Theory And Strategic Studies

As one of the problem of business financial administration, the optimization of capital structure has been the reform stress of telecommunication business. Undoubtedly the solution of capital structure problem can benefit the business reform and enable the telecommunication business to make a greater profits in the market, even reach its maximum marketing value (MV).This dissertation centers on the capital structural optimization of Hunan telecommunication. First, it introduces the theory of capital structural optimization and analyzes the theories of early net proceeds, net operating earnings, eclecticism and modern capital structure, with an emphasis on the MM theory and the balance theory based on MM. Especially the mathematical model analysis of balance theory which offers a reference for enterprises to calculate the optimized funds raisin. The paper also studies the financing decision methods under the condition of optimized capital structure. Then, it presents the problem analysis of current capital operation in telecommunication industry with a detailed study of the market demand > financial situation as well as the condition of business in Hunan telecommunication business. Moreover, on the basis of linear programming model, the paper suggests the linear project model of capital structural optimization of Hunan telecommunication to get the best capital structure coverage. Finally, the paper discusses the strategic methods and projects of capital structural optimization of Hunan telecommunication business.Thus the paper draws the conclusion that the change of capital structure will affect the relationship between the business marketing value and its profits in a supposed perfect market. According to the theory of capital structural optimization existence, the debt-more enterprise can be easily distinguished from the debt-less enterprise. When the rate of total capital returns exceeds the average debt ratio, thefinancial leverage can be fully employed for more interest, for debt financing is more profitable than stocking financing. Otherwise, it's unreasonable for the enterprise to float the loan. The optimized debt ratio is between 0.5-0.61. However, the analysis of Hunan telecommunication capital structure shows its rate of total funds earning is lower than its average debt ratio, and thus its financial leverage will work negatively. Debt does harm to the company and the only solution for an optimized capital structure is to raise funds by stocking.