Financing in firms or other corporate level investments are usually carried out by corporate organisations based on well researched financial mix. The goal of any investment is to ensure that there is a fair return and maximisation of value for the firm. The argument of Myers in the context of understanding investments for instance, where he discusses over investments and under-investment’s, can be analysed in context. In the case of under-investment, it could so happen that positive net present values in investment will accrue to debt holders. The accrual to shareholders takes a hit here. This causes the situation of a higher leverage ratio; however, this happens at the cost of less financial flexibility. With this, the issues of a micro environment that offers for growth opportunities also gets added in, leading to more issues to handle. Then managers might end up taking preventive action in leverage ratios, causing negative relationship effects between investment and the leverage that was noted earlier.
Investment hence has to be carefully decided upon. Secondly, note the case of over investment. In the case of over investment, it is possible that there could be issues of conflict between managers and shareholders. The reasoning behind these conflicts is because some groups would want to look into negative NPV investment as a way to improve the scale of the firm. In the context of the many issues surrounding a company’s capital structuring, this report is prepared for an investment company in London for which an investigation into factors affecting company’s capital structure decisions are assessed. The country chosen for analysis is the United Kingdom, and based on firm level and macroeconomic analysis, findings and correlations of relevance are presented to the management board. Detailed theoretical material is also added for the benefit of the audience.