• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Massey-Ferguson Capital Structure Analysis

Extracts from this document...


Massey-Ferguson Capital Structure Analysis 1. Massey-Ferguson operates within the farm & industrial machinery and diesel engines industry. Success in this industry requires having a large Research and Development department to keep up with new technologies, concentration more in political and economical stable countries, and building strategic partners and contracts. A large part of the industry is heavily affected by interest rate fluctuations and the current state of the economy. 2. The market strategy of the Massey Corporation was to increase growth. Growth was achieved through large amounts of debt financing in business ventures that fell outside the core competency of the Massey Corporation. While growing, Massey failed to assess the impact of a market downturn. As a result, when the market began to slow so did Massey's business ventures. ...read more.


The reason for this capital structure may be the need for Massey to keep up with its competitors and the ease of obtaining debt financing. In relation to its competitors, Massey is heavily leveraged. John Deere has less debt in relation to the amount of equity. This may make them less susceptible to slower economies and benefit their corporation. 5. The large amount of debt that the company held was coming due and the continuing operations were not able to support the interest payments. This occurred for multiple reasons. The product market strategy for Massey was misaligned due to currency fluctuations. The United Kingdom is one of the net suppliers to the rest of the world yet as the British pound gets stronger it is bringing costs of production up relative to sales, which are in US dollars. ...read more.


This is likely to work because their revenues can be sustained in the short term where the company already holds a strong market presence and start to focus on a higher margin product in a more lucrative market. 7. I would recommend that a large portion of the debt be reclassified into an equity interest. The recent news of help from the Canadian government should boost investor confidence and the likelihood that a rebound will be made. At this point a large amount of losses can be carried forward and be beneficial for taxes, where as debt would have no tax benefits at this time. If debt cannot be converted into equity then an agreement to suspend interest payments until the company becomes profitable would likely be the next alternative because the creditors would most likely acquire a majority interest in Massey- Ferguson. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Business Studies essays

  1. Advance Professional Development

    report on the findings of the activity and make relevant conclusion and recommendations. What is Skill Audit? Skills audit is a process that can be used to identify the skill gaps for an individual. The outcome is a training and development needs analysis that identifies where training and development programs are needed.

  2. Marketing. In my project, I am going to be looking at how Nestls Smarties ...

    There needs to be a catchy slogan, it could be printed on the packaging. Evaluation Criterion 1 (4 marks) Setting of an aim appropriate to the investigation Candidates should ensure that the aims of their investigation are clearly stated at the outset of the work.

  1. BP Financial analysis

    in revenues in 2008 reflects this, as it corresponds to high oil prices the same year. This association is also seen in working capital turnover, equity turnover, and asset turnover. The high price of oil gave BP protection from the economic downturn.

  2. MG 309 Strategic Management

    There are fives types of business-level strategies: cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership differentiation. Definition of Business - level Strategy by various authors: According to http://business-strategy-case.blogspot.com/2007/11/business-strategy-definition.html: Business Strategy is a term used in business planning that implies a careful selection and application of resources

  1. Training in recession?

    This entails even less time for cross-pollination. - Organizational risk is aggregated if key workers go out and, as is often the case, end-user documentation is lacking. Incumbents may scramble to number out how Alex ran normal interfaces, Neil agreed invoices, Julian filed levy accounts with the government, and Nancy conceived database backups.

  2. Ford Company Analysis - corporate structure and financial analysis

    The purposes of the Audit Committee's is to assist the Board's oversight of: 1. The reliability and integrity of the company's accounting policies and financial reporting and disclosure practices 1. The establishment and maintenance of processes to assure compliance with all relevant laws, regulations, and company policy, also a process

  1. My paper on the Deltic Timber Corporation provides an overview of the company, and ...

    We can see such factors looking at the official website of U.S. Lumber Coalition (2012): The U.S. softwood lumber industry is under severe strain from unfairly traded imports of lumber from Canada. Canadian lumber producers claim that any disadvantage for U.S. producers is due to inefficiency in the U.S. industry.

  2. Questions on Globalisation and International Trade

    For Ecuador?s consumers, the success of the industry means bigger, more vibrant flowers than were previously available. Most students will recognize that the conditions in Ecuador give the country a distinct advantage in rose growing, and that by focusing on the industry, Ecuador has been able to benefit from international trade.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work