Corporate Finance

Choose two companies of the same industry traded on the IBEX 35 (Spain).Analyze and explain:

(i)How has each one of these companies been financed (debt vs equity);

(ii)Calculate each company’s debt to equity ratio for the last three available tax years;

(iii)Compare the results and explain, in your opinion, whether you think that the debt to equity ratio chosen by each company has been the best one that these companies may have had or not;

(iv)Explain the advantages and risks that each company may have to face due to its chosen debt to equity ratio.This exercise assesses the following learning outcomes: 

(i) the theory and practices of financing a firm and its capital structure, and 

(ii) the financing risk that may result from the chosen debt ratio.