Managing over Financial Risks of Corporate — Capital Structure and Free Cash Flow

Pavel E. Zhukov ()
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Pavel E. Zhukov: The Financial University under the Government of the Russia

Finansovyj žhurnal — Financial Journal, 2012, issue 4, 47-56

Abstract: The model is proposed to set financial policy of corporation, based on two basic conditions for solvency and credibility — sufficiency of assets to back main debt and sufficiency of free cash flow to pay interest. By comparison output growth with debt growth and adding condition for free cash flow sufficiency to repay interest expenses, a simple formulas are deduced to determine the safe limit of debt to assets, debt to output and maximal primary deficit of corporate budget to build a corporate budget policy.

Keywords: the ratio of debt to assets; the ratio of debt to output; free cash flow; primary budget deficit; conditions of creditability and solvency (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:120405:p:47-56

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