You can also use Thomson One to search for companies with either very large or very small debt ratios. For example, if you want to find the top 50 companies with the highest debt ratio select: SEARCH FOR COMPANIES, ADVANCED SEARCH, ALL COMPANIES, THOMSON FINANCIAL, RATIOS, and LEVERAGE. From here, let’s select “LT Debt Pct Total Cap 5 Yr. Avg.” (This will focus in on the average capital structure over the past 5 years, which should give us perhaps a better indication of the company’s long-run target capital structure.) Once you click on SELECT, you should see the “Search Expression Builder” screen. From here, you go to “Rank” and select the top 50 by typing 50 in the box below rank, and click on ADD. You can easily change this to also select the bottom 50 (or perhaps the bottom 5 or 10 percent). Take a close look at the resulting firms by clicking on SEARCH. Do you observe any differences between the types of firms that have high debt levels and the types of firms that have low debt levels? Are these patterns similar to what you expect after reading the chapter? (As a quick review, you may want to look at the average capital structures for different industries, which is summarized in the text). Note: The searches are cumulative, so that if you ask for the top 10 percent of the database, and follow that by asking for the bottom 5 percent, you will be shown the bottom 5 percent of the top 10 percent. In other words, you would only see a small subset of the firms you are asking for. Hence, when beginning a new search, clear all existing searches first.

Access the Thomson ONE problems through the ThomsonNOW Web site. Use the Thomson ONE—Business School Edition online database to work this chapter’s questions.

Exploring the Capital Structures for Four of the World’s Leading Auto Companies

This chapter provides an overview of the effects of leverage and describes the process that firms use to determine their optimal capital structure. The chapter also indicates that capital structures tend to vary across industries and across countries. If you are interested in exploring these differences in more detail, Thomson One provides information about the capital structures of each of the companies it follows.

The following discussion questions demonstrate how we can use this information to evaluate the capital structures for four of the world’s leading automobile companies: General Motors (GM), Ford (F), BMW (BMW), and Toyota (J:TYMO). As you gather information on these companies, be mindful of the currencies in which these companies’ financial data are reported.