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RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE)

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BUSINESS INFORM №3-2018

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22

Section: Economic and Mathematical Modeling
UDC 339.92:658.14
Oliynyk-Dunn O. O., Adamenko V. V.
The Financial Leverage Effect: Problems of Use in the Process of Optimization of the Enterprise Capital Structure (p. 148 - 154)

The article is aimed at clarifying the feasibility of optimizing the structure of the company’s capital based on the effect of financial leverage for the simplest situation – in the absence of profit taxation and without considering the dynamic aspects, related to changes in the total volume and composition of assets. On the basis of use of the recognized theoretical provisions – the Modigliani-Miller postulates – the authors illustrate the fundamental difference of results of the capital structure optimization by the criterion of maximizing the profitability of equity, which stipulates use of the effect of financial leverage, and on the criterion of maximizing the value of the owners capital. It has been concluded about the disadvantage for owners of implementation in the above-mentioned static situation of any revision of the capital structure accompanied by an increase in the financial leverage ratio, as it does not lead to an increase in the value of enterprise, but only provides a threat to its decline, and worsens financial security. Building of any optimization models of the enterprise’s capital structure, including those based on use of the effect of financial leverage, has been recognized as not expedient in the considered situation.
Keywords: effect of financial leverage, structure of capital of enterprise, profitability of own capital, value of enterprise.
Fig.: 1. Tabl.: 2. Formulae: 7. Bibl.: 18.

Oliynyk-Dunn Olena O. – Doctor of Sciences (Economics), Associate Professor, Head of the Department, Department of Banking, National University of Life and Environmental Sciences of Ukraine (15 Heroiv Oborony Str., Kyiv, 03041, Ukraine)
Email: [email protected]
Adamenko Viktor V. – Senior Lecturer, Department of Economics and Finance of the Company, State University of Trade and Economics / Kyiv National University of Trade and Economics (19 Kіoto Str., Kyiv, 02156, Ukraine)
Email: [email protected]

Article is written in Ukrainian
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Reference to this article:
Oliynyk-Dunn, Olena O., and Adamenko, Viktor V. (2018) “The Financial Leverage Effect: Problems of Use in the Process of Optimization of the Enterprise Capital Structure.” Business Inform 3:148–154.


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