Executive Summary
Statement of Problem
Hospital Corporation of America (HCA) is a proprietary hospital management company that owns and manages chains of hospitals on a for-profit basis. HCA is currently facing a complex financial situation with their ratio of debt to total capital approaching 70%, as opposed to a target ratio of 60%. While some investors welcome HCA’s more aggressive use of leverage, others are worried that HCA’s capital structure could decrease the company’s current A bond rating. As a result of increased debt, a decline in HCA’s first-quarter earnings per share could occur. The company faces the problem of deciding what should be done to its capital structure and whether reducing the ratio of debt to total capital to match the target ratio would lead to improved performance.
Discussion
The issue that needs to be addressed is the target capital structure of HCA. An important goal of HCA was to maintain a 60% target ratio of debt to total......
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Approximate Word Count: 503
Approximate Pages: 2 (260 words per double-spaced page) |