US DEBT AND CORPORATE FINANCE

Fixing the US Debt situation with tools from Corporate Finance

Fixing the US Debt situation with tools from Corporate Finance

Introduction

The study is related to the US debt situation with the tools of the corporate finance. The principles or the procedure that the corporate finance includes can help the US economy to get back on the track of success as for an organization and also for the economy, it is essential and necessary that to follow the methods or the procedures of the finance which can help the economy to keep up growing on the way of prosperity.

Discussion

For fixing the debt structure of the United States, it is important that the government of the US should work on the methods that corporate finance entails because corporate finance is the field of finance on financial decisions of economy. Its main purpose is to analyze and increase the market value, that is to say, improving profits future cash under the constraint of limiting the risks. The main issues of corporate finance are for fixing the debt structure of the United States is to;

- Assess the adequacy of investment decisions

- Optimize the structure of corporate balance sheets

- To reward providers of capital

- Improve the financing conditions

The practice of corporate finance is both internal management of economy of the United States and business banking. The financial departments are in charge of the evaluation of investment projects and the contribution of capital to business life. The investment banks advise companies on ways of financing their acquisitions, on the cover of their financial risk and then act as intermediaries between economic agents in lending that are savers and the investors and funding requirements of the economies (Altman and Kishore, 1999).

US Debt and Theory of Corporate Finance

The theory of corporate finance is a field of study is closer to the microeconomics since it studies the optimal decisions of economic agents assumed rational that can help the United States in fixing the debt situation. Its main purpose is to define an optimal ratio between the expectation of financial return and its uncertainty, that is to say, its risk. The fundamental intuition linking risk and profitability an investor in the US economy will require a higher expectation of return on an investment whose success is uncertain (Amihud, Christensen and Mendelson, 1992).

The financial analysis distinguishes two concepts of profitability, a so-called economic, the second known financial.

Economic efficiency is the ratio of operating profit, affected the rate of corporation tax on its economic asset that is to say all the capital employed. She reports on how the wealth generated capital - employed; buildings, machinery, patents, need working capital. It measures the ability of the company to offer a return at all of its funding sources, creditors and shareholders.

Financial profitability measures the ratio between net incomes, that is to say, after the allocation of financial income and corporate tax, the only equity. It measures the performance of the company attributable to shareholders only, once the creditors ...