Write 11 page essay on the topic The Dynamics of Goodyears Financial Performance.In my opinion, Goodyear Tire and Rubber is a very mediocre investment. The stock price is plagued with low earnings per

Write 11 page essay on the topic The Dynamics of Goodyears Financial Performance.

In my opinion, Goodyear Tire and Rubber is a very mediocre investment. The stock price is plagued with low earnings per share yet the organization is involved in a very stable market. The gross profit margin is 21.6%, which is very hefty. Goodyear continues to diversify in other countries, which tremendously help its cause. The current stock price is up by 0.31cents. Instead of buying the stock, I would recommend holding the stock. The company has diversified its profits by being the number one company for supplying tires. From a financial standpoint, the investor should be hesitant about buying the stock. The net profit margin is in negatives and although the company shows some promising signs of boosting the stock price. it is not very certain that the stock price will continue to rise.

One of the strategies that the company can implement is a stock-split. All companies possess a number of shares that are outstanding in the market. A stock split enables the company’s board of directors to enhance the number of shares. In essence, in a 2-for-1 stock split enables a company to give a shareholder an additional share with the current stock. The stock’s price no doubt affects the stock price. After the split, the stock price declines, however, the number of shares in the market increases. Although the primary goal of the stock split is to make the shares more affordable for investors, which boosts the price of the stock after the split as it enables individuals to buy the stock and tremendously enhancing the demand for it. Lastly, a stock split gives confidence to the investor that the company will continue to flourish in the future. Although this case might not always be true, investors are still buying the stock because of the affordability factor.

The company’s optimal capital structure refers to the weighted-average cost of capital. Hence, it boosts the firm’s stock, yet does not fully boost the earnings per share. The primary motive of the organization is to have an appropriate estimation for the unleveraged rate of return in its market. Goodyear acknowledges the WACC is 15% and its average leverage ratio of 40%.