External link to Why Isn’t Money Consider A Capital In Economics?
External link to M&M Theory or Capital Structure Irrelevancy Theory
2. Why isn’t money consider a capital in economics? Capital is a physical asset, which can be used to produce goods and services. Money is related to capital, in that it can be used to purchase capital, but it is not itself capital. The distinction is important if you consider that money can be created or destroyed through the expansion or contraction of credit, but […]
Modigliani and Miller (1958) stated that M&M theory also known as capital structure irrelevancy theory. It stated that financial leverage does not affect the firm’s value in perfect market because without taxes, transactions cost or bankruptcy costs in perfect market and all information are symmetries. (Faruk Ahmeti and Burim Prenaj, 2015) Thus, value of levered firm is same as the value of unlevered firm (Abeywardhana, […]