BUSINESS FINANCE

Business Finance Theory and Practice

Testing the Modigliani & Miller against green business data

Introduction

Green business is a rapidly growing sector that is replacing IT as a key driver of the stock market. There are many new green businesses emerging and they provide an insight into modern business trends. This assignment tests the Modigliani & Miller against green business data, which includes the stock price change in percentage in a year and the gearing ratio. The paper first discusses the green businesses, social enterprises and explores the theory of Modigliani and Miller's. It also describes the basic concept of gearing ratio. The correlation is used to test the hypothesis statistically and conclusion is made on the basis of results and analysis.

Green Business

Environmental issues have taken too much importance at Overall, in both developed and developing countries developing countries, according to the above environmental degradation that can be perceived in different around the world. The important point to be emphasized is the positive attitude that has been developed by companies to undertake a new approach to environmental situation that exists today. Part the positive approach that companies have developed about the environmental situation at present is the approach of Green Business. These are the company or business that has no or very minor negative impacts on the global environment or local, community, society. The economy is also as a business or company that strives to meet with a triple bottom line balance: people, planet, profit that focuses on: people, planet and benefit (Zee, 2008, 77). With the continuing difficulties in the world and the uncertainty of energy costs, alternative energy initiatives are flourishing. Green Business Profits sells a kit that will show you how to put up a solar installation company.

Social Enterprises

Social enterprises are businesses whose activities have social objectives. They use business tools and technologies to achieve social benefits. It operates under different brands and legal forms, such as social cooperatives, Activation of Professional Bets, Mutual Insurance Company, the company's charitable, non-profit or those belonging to NGOs, cooperatives, mutual and loan guarantee funds (including micro-loan), and finally organizations NGOs engaged in business activities in various forms (Noya & Lecamp, 2002, 90). Social Enterprises spend their profits for social purposes. As operators, they should make money, but as traders, operating in the social purposes, do not focus on maximizing profits for shareholders. Their goal is to maximize social benefits, for example, by providing good quality public services, promoting local development and restoration of dignity and economic independence for socially excluded people. Social enterprise (company) works like any other commercial enterprise and differs only in that it is engaged in employment and long-term unemployed people with poor health, providing them with special care in their work.

Modigliani and Miller's (M&M's)

Modigliani and Miller's proposition (1958) are based on the assumption of perfect financial market and it cannot hold up if include in some intervening factors like income taxes (Myers, 1984, 187-221). With respect to the MM theory proposed, capital structure coining and ...