Executive summary

This assignment is to compare the capital structure, and cost of capital between two same companies in Bursa Malaysia and their effect to market valuation and firm’s performance. It is also to indicate how the companies gearing levels and cost of capital affect the firm’s value and profitability ratios. The ratios being used are for comparing and investigating the relationships between two companies’ financial information. Besides, it indicates if higher gearing level and higher cost of capital affect the firm’s value and performances. This assignment was focused on AirAsia and Malaysia Airline.A company's capital structure refers to the relative proportions of equity (raising money by selling shares) and debt (raising money by borrowing) which the company uses to finance its activities.
The uses of capital structure are important to distinguish between market value and book values. In general, financial economic prefer to use market value went measuring debt ratio because it reflect current value whether than historical values. Financial economist does belief that current market value reflects true intrinsic value. In the other hand the uses of book value is very popular because of volatility of stock market it is frequently claimed that the inherent volatility of the stock market makes market-debt ratios move around too much.
A company's capital structure can have an enormous impact on its earnings per share, taxes, and interest payments, even though it is relatively easy for companies to change capital structures such as to pay off debt by selling new shares.
Cost of capital is the return expressed in terms of an interest rate, which an organization is required to pay for the capital used in financing its activities. The cost of capital determines how a company can raise money through a stock issue, borrowing, or a mix of the two. This is