Milestone map
Milestone map
3 milestones
Apply Capital Structure Analysis to a Real Company
3–4 weeks
Select a real listed company and analyse its current capital structure using the Modigliani-Miller framework, trade-off theory, and pecking order theory. Calculate the company's WACC, debt-equity ratio, and interest coverage ratio. Assess whether the current capital structure appears optimal relative to industry norms.
Proof required
Submit: (a) a capital structure analysis (minimum 1,200 words) for the chosen company covering: current D/E ratio with historical trend (five years), WACC calculation with inputs sourced, interest coverage ratio, comparison against two named industry peers, and an assessment of whether the structure is appropriate under trade-off theory, and (b) links to the actual financial filings used.
What gets checked
- D/E ratio and interest coverage calculated from actual financial statements — not pulled from a data site without verification
- Trade-off theory assessment addresses the tax shield and financial distress costs explicitly
- Comparison against named peers with actual peer ratios
Common mistakes
- Applying capital structure theory without grounding in the company's actual balance sheet
- Treating the current D/E ratio as 'correct by definition' — the analysis must assess optimality
Resources
What a verifier looks for
- Challenge the trade-off assessment: 'You concluded the company is underleveraged — but their interest coverage ratio is already below the investment-grade threshold. How do you reconcile that with the recommendation to take on more debt?'
Analyse a Capital Allocation Decision (Dividend, Buyback, or M&A)
2–3 weeks
Analyse a specific capital allocation decision made by the company in the last three years — a dividend policy change, a share buyback programme, or an acquisition. Apply the relevant corporate finance frameworks (Dividend Irrelevance Theory, free cash flow theory, synergy valuation) to assess whether the decision created or destroyed shareholder value.
Proof required
Submit a capital allocation decision analysis (minimum 1,500 words) covering: (a) description of the specific decision with timeline and magnitude, (b) application of the relevant corporate finance framework with justification for the framework chosen, (c) market reaction analysis (stock price response in the 90 days following the announcement), and (d) your assessment of whether the decision created or destroyed value and why.
What gets checked
- Specific decision is real and identifiable — not a hypothetical scenario
- Framework application is justified — why this framework for this decision type
- Value assessment takes a position with reasoning — not both sides without a conclusion
Common mistakes
- Describing the decision without applying a framework
- Confusing stock price reaction with value creation — short-term market reactions are not a reliable measure of long-term value creation
What a verifier looks for
- Challenge the value assessment: 'You concluded the acquisition destroyed value because the stock fell on announcement — but acquirer stocks routinely fall on M&A announcements due to uncertainty rather than expected value destruction. How does your analysis go beyond the stock price reaction?'
Present Case Analysis to a Corporate Finance Professional
1 week
Present the capital structure and capital allocation analyses to a corporate finance professional (CFO, investment banker, corporate finance academic, or equity analyst) who will challenge at least two of your analytical conclusions.
Proof required
Submit: (a) Q&A log from the review session (minimum 350 words with at least two challenges and responses), and (b) attendance record with reviewer name and finance credentials.
What gets checked
- Reviewer has corporate finance credentials — not just general accounting background
- Q&A log shows challenges to framework application or conclusions
- Responses address the challenge analytically
Common mistakes
- Review session with an accountant rather than a corporate finance practitioner — the frameworks are different
- Challenges are deflected rather than addressed analytically
What a verifier looks for
- Your most valuable challenge: 'Under your capital structure analysis, you've computed the optimal D/E ratio as X — walk me through the specific mechanism by which you would expect the company's value to increase if management moved to that ratio.'
- Provide written confirmation (minimum 150 words) of your corporate finance credentials and the challenges raised.