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Telecommunication Service, Inc

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Submitted By athirahmuaz
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Telecommunication Services Inc. (TSI) is a company that was founded in nothern region back in 1994 by the Adamson’s family. The company provide an address and phone number for small companies which may not have a full-time office staff but still need to respond rapidly to the inquiries from their customers. The company soon expanding due to the development of IT industry and due to the numerous demand for its services. Due to those factors, additional to the emerging growth industry for telecommunication services, TSI able to achieved an award in 2002 for being 100 best-managed companies in the country. The company basically divided into two main division which is the Mail and Messaging Services Division and the Mobile Phone Leasing Division with different equipment and staff are differ some way. After thoroughly looked at TSI’s Balance Sheet as of 31 December 2013, the company dosen’t have the Retained Earning item which indicates that TSI pay out all the earning that they received to the shareholders as dividend. Since the company need to reconstruct its process, the retained earning is one of the item needed to estimate the new cost of retained earning which also comprises Long term debt (LTD), Preferred Shares (PS) and Common Shares (CS) in the capital structure. Retained Earning is important as it is a profit that company keep or retain and did not pay out as dividend for company future growth or expansion. Retained Earning has opportunity cost that associated with it because rather than keeping the money within, its better to get it invest or make something useful with it. If TSI deciding on how to finance a new project, they need to minimize the distribution of dividends to shareholders by using ‘pecking order’ theory where internal source of capital will be more preferrable rather than

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