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The Pink Balance Sheet: An Easy Way To Teach Capital Structure Basics

Author

Listed:
  • Lynda S. Livingston

Abstract

Students of corporate finance must learn the basics of capital structure theory. However, most textbook discussions are confusing and include too many equations. We present a simple model of tax-related capital structure basics that incorporates only three components: a market-value balance sheet, colors that represent risk, and one equation. Students mastering the pink balance sheet should be able to remember easily the various implications of basic capital structure models, including beta relationships such as the Hamada equation

Suggested Citation

  • Lynda S. Livingston, 2018. "The Pink Balance Sheet: An Easy Way To Teach Capital Structure Basics," Business Education and Accreditation, The Institute for Business and Finance Research, vol. 10(1), pages 21-37.
    • Handle: RePEc:ibf:beaccr:v:10:y:2018:i:1:p:21-37
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    More about this item

    Keywords

    Capital Structure; Beta Levering; Hamada Equation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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