Why's corporate always routinely raising finance annually?

Capital market theory assumes that efficient market. That’s why the prices change usually concurrent with changes base upon economic fundamentals, also the market prices of publicly traded stocks represent the consensus of investors to the present value of cash flows. Under this theory, company looking for a fund to maintain day to day operation probably use vary methods to arise capital. Assumed bigger company required a new capital routine annually to diversify risk of uncertainty following year, but why they must be do that in every year?

“Do not put all your eggs in single basket”, what an idiomatic phrase well describe everything might not over focus all handing resources on one investment pattern. The answer is risk, in realty, most of unavoidable risk around the world. Especially in modern economic market, after bankrupt of Lehman Brothers Holding Inc. investors as well as entrepreneur initially recognised that trusts and credits will never be the safeguard for their investment. When I start to study what is risk and which is most risky, I classified out three main categories of economic sense risk, Maturity risk, Market risk and Unique and other risk instant. First of all, Maturity risk means the risk that overall value of the particular investment may suffer floatable when changes by the general level of interest rates. Normally, company expect a long term debt in which more responsibly bargain the levels of interest return rates since Yield To Maturity (YTM) become measure as maturity. For instant, U.S.A. government always viewed as a benchmark for risk-free rates which comparative tool to calculate. But, as long as the term of debt issue, the much of sensitivity to alter by market uncertainly factors interaction form uncertainly of future inflation level. Moreover, a non-diversifiable risk named market risk also might not foresee next day uncertainly of future rewards. Because in general, systematic risk are cannot wipe out by well-diversified portfolio. A classic demonstration via Capital Asset Pricing Model (CAPM) easy specifically estimates hereafter flow. Using expected premium rate of return to show that market risk difficult or even the possibility to diversify. Measure sensitivity to the market risk as Beta can understand the stock volatility in whole market, most important reveal the relationship between market and integrated trend. We can simply see a number to overview exchange market tendency, but most of the figure is deeply rely on beta not consider about future and general economic condition. The last one I concern though unique and other risk are also residual risk. Both of uncertainty of expected returns and arising from unsystematic characteristics like another risk and the main different is market inefficiency cause by liquidity problems. In publicly traded stocks market represent all investors seek liquidity in capital.

Greggs the UK's biggest bakery chain, multimillion pound Tyneside-based firm which own more than 1,540 stores around UK downtowns, but also plan to open at least 80 new stores are well on track. What a massive local firm, and I am pretty interest in their capital structure, how can they keep expand their map and renewal their stores as well as a new facility on Tyneside?

Found graphic from Financial Times, surprisingly only one year (2008) recorded £2.4M and none at all in other years. The D/E ratio incredibility remained at 0.00, current ratio and quick ratio are also in range of health level. It’s not possible to believe a bigger firm like this can fully capital by equity. Within this case, equity is more suitable funding method to adopt, it is because Greggs already got huge economic size fit London Stock Exchange requirement to list, a health statement benefited into public financial statement. Even IPO or public issue are costly, but greater in reputation is given. Furthermore, without any obligation pay any dividends or just fulfil most of shareholders hopes, pay the minimum amount dividend whatever profit current year, profit-sharing scheme is not promised. Thus, dividends payment cannot reduce taxable payment that’s why declares dividends calculated by after-tax earnings. Additionally, the firm carry out majority management right keep in hand.

Likewise, I also recommend Greggs might apply issue a debt for long-term funding. Since I study few years of Greggs annual report, a large measure working capital come from previous year retained earnings. If any problem issued cause that year not so much profitability like pastime, capital liquidly will face a warning alarm. In case that predicament comes true, then an urgent funding maybe necessary arise in temporary. Weighted Average Cost Of Capital (WACC) remix debt might be an inexpensive, low risk way to solve this. But the way, Greggs is a great finance control company seems as an example to other firms overreach relies upon short-term and long term misapply.