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46-643: Sony de Elá Nguema is an Equatorial Guinean football club based in the Malabo neighborhood of Elá Nguema. The club won 8 titles in a row, from 1984 to 1991. This article about an Equatoguinean football club is a stub . You can help Misplaced Pages by expanding it . Football club (association football) The sport of association football allows teams that partake in some sort of club activity to participate in tournaments such as leagues and other competitions. Teams must register their players as well as staff and other personnel to be eligible to represent

92-480: A (professional) football club is incorporation . A football club is an entity which is formed and governed by a committee and has members which may consist of supporters in addition to players. A consequence of the FIFA rules and regulations for association football clubs is that players are not allowed to be owned by any legal entity other than the clubs themselves. This means that the involvement of external investors in

138-644: A business, city or district. Clubs often are the sole event organisers of their home games. Stadium naming rights are sometimes procured by sponsors to generate additional sources of revenue for the football club. Normally this requires the club (or its owners) to have sole ownership of the stadium of which naming rights are sold. An association football club exists as a business entity. The club signs commercial contract with players as well as non-playing personnel. As any business entity it has its own secretary or secretarial department as well as financial, legal, accounting and other departments. The club also often has

184-476: A club is and is not allowed to do with their spending and capital holdings. The capital structure of a football club most closely resembles that of a nonprofit corporation , although it may still be profitable per se to its investors. A practical example is the fact that clubs may deliberately price matchday tickets below market value , instead favouring a higher stadium attendance or membership priority access over total matchday revenues. Another notable example

230-440: A combination of their own youth academies, as well as external sources of talent (pools) through affiliated clubs as well as the arrangement of youth tournaments. An association football club normally has a designated stadium as their home ground, where the club plays its home games, which normally make up about half of fixtures for a given season. The home ground can either be owned by the club itself or by some other entity such as

276-440: A department or someone who popularizes it or interacts with public on behalf of the club (public affair). The club may also contain own agronomist or whole agricultural department. An association football club often times provides some medical support in forms of first or urgent medical aid and physical rehabilitation or recovery plans for its players. Capital structure In corporate finance , capital structure refers to

322-521: A dynamic structure that approximates reality. A similar type of research is performed under the guise of credit risk research in which the modeling of the likelihood of default and its pricing is undertaken under different assumptions about investors and about the incentives of management, shareholders and debt holders. Examples of research in this area are Goldstein, Ju, Leland (1998) and Hennessy and Whited (2004). In addition to firm-specific characteristics, researchers find macroeconomic conditions have

368-405: A firm's capital structure is relevant to its value in the real world. Up to a certain point, the use of debt (such as bonds or bank loans) in a company's capital structure is beneficial. When debt is a portion of a firm's capital structure, it permits the company to achieve greater earnings per share than would be possible by issuing equity. This is because the interest paid by the firm on the debt

414-845: A manner compatible with their growth types. As economic and market conditions improve, low growth type firms are keener to issue new debt than equity, whereas high growth type firms are least likely to issue debt and keenest to issue equity. Distinct growth types are persistent. Consistent with a generalized Myers–Majluf framework, growth type compatibility enables distinct growth types and hence specifications of market imperfection or informational environments to persist, generating capital structure persistence. A capital structure arbitrageur seeks to profit from differential pricing of various instruments issued by one corporation. Consider, for example, traditional bonds, and convertible bonds . The latter are bonds that are, under contracted-for conditions, convertible into shares of equity. The stock-option component of

460-616: A material impact on capital structure choice. Korajczyk, Lucas , and McDonald (1990) provide evidence of equity issues cluster following a run-up in the equity market. Korajczyk and Levy (2003) find that target leverage is counter-cyclical for unconstrained firms, but pro-cyclical for firms that are constrained; macroeconomic conditions are significant for issue choice for firms that can time their issue choice to coincide with periods of favorable macroeconomic conditions, while constrained firms cannot. Levy and Hennessy (2007) highlight that trade-offs between agency problems and risk sharing vary over

506-447: A national level within each national member association. The majority of association football clubs take part in a league system . These league systems are governed on a continental level by the six regional FIFA confederations. Football clubs exist all over the world on amateur, semi-professional or professional levels of the game. They can be owned by members as well as business entities. Football clubs have been in practice since

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552-422: A presence within a certain geographic area where football is a natural part of the culture. Football clubs may also expand their area of reach further from the local region of origin to whom they belong. Many association football clubs will have either one or more youth systems connected to the organization, either as part of the club, or as an affiliate to the club. The more prestigious football clubs often have

598-403: A recognition of how outsiders view the strength of the firm's financial position. Key considerations include maintaining the firm's credit rating at a level where it can attract new external funds on reasonable terms, and maintaining a stable dividend policy and good earnings record. Once management has decided how much debt should be used in the capital structure, decisions must be made as to

644-400: Is a negative relationship in the market between companies' relative price volatilities and their leverage. This contradicts Hamada who used the work of Modigliani and Miller to derive a positive relationship between these two variables. Three types of agency costs can help explain the relevance of capital structure. An active area of research in finance is that which tries to translate

690-429: Is an advantage to financing with debt, namely, the tax benefits of debt and that there is a cost of financing with debt the bankruptcy costs and the financial distress costs of debt. This theory also refers to the idea that a company chooses how much equity finance and how much debt finance to use by considering both costs and benefits. The marginal benefit of further increases in debt declines as debt increases, while

736-770: Is an important issue in setting rates charged to customers by regulated utilities in the United States. Ratemaking practice in the U.S. holds that rates paid by a utility's customers should be set at a level which assures that the company can provide reliable service at reasonable cost. The cost of capital is among the costs a utility must be allowed to recover from customers, and depends on the company's capital structure. The utility company may choose whatever capital structure it deems appropriate, but regulators determine an appropriate capital structure and cost of capital for ratemaking purposes. The Modigliani–Miller theorem , proposed by Franco Modigliani and Merton Miller in 1958, forms

782-428: Is important that a company's management recognizes the risk inherent in taking on debt, and maintains an optimal capital structure with an appropriate balance between debt and equity. An optimal capital structure is one that is consistent with minimizing the cost of debt and equity financing and maximizing the value of the firm. Internal policy decisions with respect to capital structure and debt ratios must be tempered by

828-461: Is irrelevant in a perfect market, then imperfections which exist in the real world must be the cause of its relevance. The theories below try to address some of these imperfections, by relaxing assumptions made in the Modigliani–Miller theorem. Trade-off theory of capital structure allows bankruptcy cost to exist as an offset to the benefit of using debt as tax shield. It states that there

874-417: Is not normative i.e. and does not state that management should maximize EPS, it simply hypothesizes they do. The 1982 SEC rule 10b-18 allowed public companies open-market repurchases of their own stock and made it easier to manipulate capital structure. This hypothesis leads to a larger number of testable predictions. First, it has been deducted that market average earnings yield will be in equilibrium with

920-461: Is preferred over equity if external financing is required (equity would mean issuing shares which meant 'bringing external ownership' into the company). Thus, the form of debt a firm chooses can act as a signal of its need for external finance. The pecking order theory has been popularized by Myers (1984) when he argued that equity is a less preferred means to raise capital, because when managers (who are assumed to know better about true condition of

966-465: Is tax-deductible. The reduction in taxes permits more of the company's operating income to flow through to investors. The related increase in earnings per share is called financial leverage or gearing in the United Kingdom and Australia. Financial leverage can be beneficial when the business is expanding and profitable, but it is detrimental when the business enters a contraction phase. The interest on

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1012-442: Is the prevalence of community initiatives by professional football clubs. The English Premier League is wholly owned by its 20 participating member clubs. Professional football clubs also act as market entities offering a highly sought after product to an entertainment sector audience. It therefor acts as a market intermediator between its product (the football players) and its market (the supporters). In doing so, it fills

1058-515: The marginal cost increases, so that a firm optimizing its overall value will focus on this trade-off when choosing how much debt and equity to use for financing. Empirically, this theory may explain differences in debt-to-equity ratios between industries, but it doesn't explain differences within the same industry. Pecking order theory tries to capture the costs of asymmetric information. It states that companies prioritize their sources of financing (from internal financing to equity) according to

1104-518: The 19th century, with the existence of clubs dating back to the 1850s . During the early 1860s, there were increasing attempts in England to unify and reconcile the various football games that were played in the public schools as well in the industrial north under the Sheffield Rules. Working class, industrial cities all over the U.K. began forming their own Football Associations in the late 1800s, from

1150-607: The Scottish Football Association in 1873 to Lancashire FA in 1878. Teams still in existence began popping up, some with the help of the Church; for example, Aston Villa was founded in 1874, Wolverhampton Wanderers in 1877, Bolton Wanderers in 1874 and Everton in 1878. Due to the scope and popularity of the sport, professional football clubs carry a significant commercial existence, with fans expecting personal service and interactivity, and external stakeholders viewing

1196-404: The United States. The utility company has the right to choose any capital structure it deems appropriate, but regulators determine an appropriate capital structure and cost of capital for ratemaking purposes. Various leverage or gearing ratios are closely watched by financial analysts to assess the amount of debt in a company's capital structure. The Miller and Modigliani theorem argues that

1242-518: The acquirement of players to the club must only involve the eventual transfer of the rights to the contract of the player in question, and not the contract itself. There are several professional football clubs that are publicly traded. Normally, football clubs are not run with the intent of profit maximization , as its sports outcomes are considered more important than its financial outcomes by its ownership. In addition, financial regulations as, for example, UEFA Financial Fair Play may also limit what

1288-463: The appropriate mix of short-term debt and long-term debt. Increasing the percentage of short-term debt can enhance a firm's financial flexibility, since the borrower's commitment to pay interest is for a shorter period of time. But short-term debt also exposes the firm to greater refinancing risk . Therefore, as the percentage of short-term debt in a firm's capital structure increases, equity holders will expect greater returns on equity to compensate for

1334-401: The base with which to examine real world reasons why capital structure is relevant, that is, a company's value is affected by the capital structure it employs. Some other reasons include bankruptcy costs , agency costs , taxes , and information asymmetry . This analysis can then be extended to look at whether there is in fact an optimal capital structure: the one which maximizes the value of

1380-409: The basis for modern academic thinking on capital structure. It is generally viewed as a purely theoretical result since it disregards many important factors in the capital structure process factors like fluctuations and uncertain situations that may occur in the course of financing a firm. The theorem states that, in a perfect market, how a firm is financed is irrelevant to its value. This result provides

1426-462: The business cycle and can result in the observed patterns. Others have related these patterns with asset pricing puzzles. Corporate leverage ratios are initially determined. Low relative to high leverage ratios are largely persistent despite time variation. Variation in capital structures is primarily determined by factors that remain stable for long periods of time. These stable factors are unobservable. Firms rationally invest and seek financing in

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1472-470: The club in any activity as it regards to association football competitions. In association football terminology, competitions are referred to as "club competitions". Supporters may also acquire membership rights within their club. Even sponsors may be accounted for as members of the club of affiliation. This is a reason as to why the sport came to be called association football. The exact requirements for club licensing are regulated by FIFA and implemented on

1518-425: The debt must be paid regardless of the level of the company's operating income, or bankruptcy may be the result. If the firm does not prosper and profits do not meet management's expectations, too much debt (i.e., too much leverage) increases the risk that the firm may not be able to pay its creditors. At some point this makes investors apprehensive and increases the firm's cost of borrowing or issuing new equity. It

1564-416: The field of professional football as a source of significant business advantages. For this reason, expensive player transfers have become an expectable part of the sport. Awards are also handed out to managers or coaches on a yearly basis for excellent performances. The designs, logos and names of professional football clubs are often licensed trademarks. The difference between a football team and

1610-437: The firm than investors) issue new equity, investors believe that managers think the firm is overvalued, and managers are taking advantage of the assumed over-valuation. As a result, investors may place a lower value to the new equity issuance. The capital structure substitution theory is based on the hypothesis that company management may manipulate capital structure such that earnings per share (EPS) are maximized. The model

1656-445: The firm. Consider a perfect capital market (no transaction or bankruptcy costs; perfect information ); firms and individuals can borrow at the same interest rate; no taxes ; and investment returns are not affected by financial uncertainty. Assuming perfections in the capital is a mirage and unattainable as suggested by Modigliani and Miller. Modigliani and Miller made two findings under these conditions. Their first 'proposition'

1702-466: The increased risk, according to a 2022 article in The Journal of Finance . In the event of bankruptcy, the seniority of the capital structure comes into play. A typical company has the following seniority structure listed from most senior to least: In practice, the capital structure may be complex and include other sources of capital. Financial analysts use some form of leverage ratio to quantify

1748-407: The law of least effort, or of least resistance, preferring to raise equity as a financing means "of last resort". Hence, internal financing is used first; when that is depleted, debt is issued; and when it is no longer sensible to issue any more debt, equity is issued. This theory maintains that businesses adhere to a hierarchy of financing sources and prefer internal financing when available, and debt

1794-473: The market average interest rate on corporate bonds after corporate taxes, which is a reformulation of the ' Fed model '. The second prediction has been that companies with a high valuation ratio, or low earnings yield, will have little or no debt, whereas companies with low valuation ratios will be more leveraged. When companies have a dynamic debt-equity target, this explains why some companies use dividends and others do not. A fourth prediction has been that there

1840-421: The market value of a firm is unaffected by a change in its capital structure. This school of thought is generally viewed as a purely theoretical result, since it assumes a perfect market and disregards factors such as fluctuations and uncertain situations that may arise in financing a firm. In academia, much attention has been given to debating and relaxing the assumptions made by Miller and Modigliani to explain why

1886-485: The mix of various forms of external funds, known as capital , used to finance a business. It consists of shareholders' equity , debt (borrowed funds), and preferred stock , and is detailed in the company's balance sheet . The larger the debt component is in relation to the other sources of capital, the greater financial leverage (or gearing, in the United Kingdom) the firm is said to have. Too much debt can increase

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1932-441: The models above as well as others into a structured theoretical setup that is time-consistent and that has a dynamic set up similar to one that can be observed in the real world. Managerial contracts, debt contracts, equity contracts, investment returns, all have long lived, multi-period implications. Therefore, it is hard to think through what the implications of the basic models above are for the real world if they are not embedded in

1978-625: The proportion of debt and equity in a company's capital structure, and to make comparisons between companies. Using figures from the balance sheet, the debt-to-capital ratio can be calculated as shown below. The debt-to-equity ratio and capital gearing ratio are widely used for the same purpose. Capital bearing risk includes debentures (risk is to pay interest) and preference capital (risk to pay dividend at fixed rate). Capital not bearing risk includes equity. Therefore, one can also say, Capital gearing ratio = (Debentures + Preference share capital) : (shareholders' funds) Capital structure

2024-454: The risk of the company and reduce its financial flexibility, which at some point creates concern among investors and results in a greater cost of capital . Company management is responsible for establishing a capital structure for the corporation that makes optimal use of financial leverage and holds the cost of capital as low as possible. Capital structure is an important issue in setting rates charged to customers by regulated utilities in

2070-401: Was extended to include the effect of taxes and risky debt. Under a classical tax system , the tax-deductibility of interest makes debt financing valuable; that is, the cost of capital decreases as the proportion of debt in the capital structure increases. The optimal structure would be to have virtually no equity at all, i.e. a capital structure consisting of 99.99% debt. If capital structure

2116-426: Was that the value of a company is independent of its capital structure. Their second 'proposition' stated that the cost of equity for a leveraged firm is equal to the cost of equity for an unleveraged firm, plus an added premium for financial risk . That is, as leverage increases, risk is shifted between different investor classes, while the total firm risk is constant, and hence no extra value created. Their analysis

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