21. In this exercise, we will calculate the capital structures of several firms and examine the stability of those structures.

Enter Thomson ONE for each of the seven companies we have been working with; Sherwin Williams (SHW), General Motors (GM), Harley-Davidson

(HOG), Starbucks (SBUX), Microsoft (MSFT), General Mills (GIS), and Yahoo (YHOO), and locate the five-year balance sheet history. Scroll down to the liabilities and equities section and write down the firm’s capital components over the last five years. Then compute the capital structure as of the end of each year.

a. Are the structures relatively stable over time?

b. Might stability reflect a target capital structure or could there be other reasons for it?

c. Which of the firms might be applying the ideas presented in this chapter about managing stock price with leverage? Which companies don’t seem to be paying much attention to that idea?

d. Our firms are from different industries but some may have similar capital structures.

What characteristic do those firms share that could explain the similarity.

(Hint: Why do certain companies have little or no debt?)

e. Do any of the firms seem to have too much debt?

f. How could a debt-heavy capital structure come about despite management’s efforts to maintain a more conservative structure?