"DETERMINANTS OF THE CAPITAL STRUCTURE OF THE COMPANIES OF THE FOOD AND BEVERAGE INDUSTRY OF THE LIMA BURKET OF VALUES"

Road Arribasplata, Erick Edgardo

Erick.estrada.arribasplata@gmail.com

Machuca Marín, Heily Noelia

Heily.machuca.marín@gmail.com

SUMMARYThis paper examines the determinants of the capital structure of companies in the food and

beverage industry of the Lima Stock Exchange for the years 2012 to 2015. An investigation was

conducted taking into consideration a database of series Of a cross-section made up of 18

Peruvian companies that are listed in the food and beverage index, analyzing the cost of debt,

the marginal tax rate, liquidity measured by cash flow over the firm's value, The annual

dividend rate and the size of the company as measured by net annual sales, using ratios that help

analyze terms of increasing or reducing financing. Ordinary least squares models were used in

terms of elasticities.

Keywords: Capital Structure, Cost of Debt, Food and Beverages.

JEK codes G2; G23; G24.

ABSTRACT

In this document we identify the determinants of the firm's capital structure in the food and

beverage industry of the Lima Stock Exchange, for the years 2012 to 2015. The investigation

was conducted considering the analysis of a cross-section database, consisted of 18 Peruvian

companies Listed on the index of food and beverages. We analyze the cost of debt, the marginal

tax rate, the liquidity measured by the cash flow to the value of the firm ratio, the lifetime of

companies, the annual dividend rate and the size of the company measured by annual net sales,

using ratios That help analyze terms of increasing or reducing funding.  Models based on

ordinary least squares in terms of elasticities were used.

Keywords: Optimal Capital Structure, Cost of Debt, Food and Beverage.

JEL Codes: G2; G23; G24; M1.

I. INTRODUCTION

The present study is a descriptive-causal cross-sectional series research, located within the

research line of Business Management, which develops a study on the determinants of the

financial structure of firms; Based on the application of a theoretical framework of scientific

knowledge to a concrete reality, as is the case of companies in the food and beverage sector of

the Stock Exchange of Lima.

In Peru, the Peruvian industry or manufacturing industry accounts for about 15% of Peru's gross

domestic product (GDP), which in dollars amounts to 8,586 million dollars for 2002. The sector

has grown at an annual rate of 3% since The year 1992, a slow but positive growth. The

Peruvian market is characterized by small companies, all of which are not publicly traded, so

that companies in the food and beverage sector are few, the most representative being the

Alicorp Group, the Gloria Group (with operations in Bolivia, Central America and other

countries), the Embotelladora Latinoamericana group is now part of the Brazilian Ambev

Group, Lindley Coca Cola partner company, the Kraft Foods Group, the Sipesa Group, one of

the largest exporters of processed fish food in the country And the smaller ones are Maize

Derivatives and Sea Products. But at the same time, the companies in this area are being much

more competitive because all of them maintain investment decisions as well as financing

decisions, which contribute to the increase of the companies' performance Who seek to lead in

the market; So in our research we will identify the companies belonging to the food and

beverages sector, so that the managers of this item have a culture that allows them to appreciate

the impact of their decisions from the economic and financial point of view; Taking into account

a better use of resources and achieving better results with less costs, which can be achieved with

an effective capital optimization structure.

The question that guides the research is: What are the determinants that influence the capital

structure of companies in the food and beverage industry of the Lima Stock Exchange for the

years 2012 to 2015?

The work is organized in the following way: in section I is the introduction, background,

theoretical bases, the objective of our investigation and finally the hypothesis, in section II the

methods used in the project are detailed in section III is interpreted the results obtained, and

finally in section IV the conclusions are presented.

In relation to this investigation the following international antecedents were found:

As a starting point it is considered l n Myers assertion or when

quoted Goyal (2004) - Do not í is a universal theory of capital structure, nor a reason or n to

wait there - It is interpreted as ay h í conditional theory as they are useful. Each factor can be

dominant for some firms or in some circumstances even as í, unimportant in another context.

The assessment or n of the theory í as the capital structure directly leads to the plane

emp rich í, particularly the conduction or n test QUEUEANDSTATISTICSMANsticas and

econom é metric that can validate or reject predictions that each theory  ay Suggests with respect

to the factors or variables that explain the level of this structure.  As for an nalysis of these

evaluations is to I prefaced with the precision or the notion n or n or optimal structure of

capital.

Myers (1984) plant or the question of the existence of different debt ratios in

cross - sectional evidence is because firms have different coefficients or ptimos or because

temporarily diverged from those observed. In this context the literature, from the perspective of

a structure or optimal capital, how to estimate the structure and the importance of adjustment

costs that can generate discrepancies or deviations mentioned above is analyzed falls. Together

these approaches din to monkeys there alsoAppen volume u n greater than studies that address

the issue in the form is to tica, by evidence of the predictions of the theory í to the

structure or ptima from coefficients observed indebtedness.

Titman (2005) found evidence indicating that firms have a target capital structure,

determined by considerations of cost and benefit of the debt, but whose coefficients observed

var debt í an according to the degree of flexibility following this objective . These authors

mention that the market imperfections, asymmetries í ace of information or ny costs of

transaction or n take it the story of signatures in t é terms of variations in cash flows, investment

expenditure or ny capital costs stock, which is the main determinant of the structure or capital

ptima observed at a given time. For an analysis to emp rich í the authors address the

construction or n the level of proxies target company debt.

Barbosa (2011) ays that among the various factors related to indebtedness four factors

to be analyzed í emp is richly by the model of capital structure, which

are:Profitability, T loves ñ or the company nor, T angibilidad and R isk are selected and

analyzed four factors. The level of debt (leverage), which is the dependent variable of the model

is analyzed in two ways: TD (total debt / total assets) and TL (Total liabilities /

total assets). The works have studied in various ountries pa over time the effects of these

variables with n relationship or the level of indebtedness. The results indicate that profitability

variable, s u n t to most of the studies and the theory ay peckingorder, presents

a negative relationship or n with debt. The variable size ñ or the

company nor, sec u n t to most studies and í a tradeoff theory presents

a positiverelationship or n. S u n t to most studies, tangibility presents a relationship or positive

n, and on the other hand, risk a relationship or negative n. Given the consensuspresented, the

hip or thesis analyzed by this work for the Brazilian market ñ or are variables return and risk are

negatively related to the level of indebtedness, while thesize variables  ñ oy tangibility is

positively related to the level of indebtedness.

The study on determinants of capital structure in the small ñ ay median family business

M é xico, Berumen Gonz lez, Garc í Soto and Domengue Mu ñ oz (2012),examines n internal

determinants that influence capital structure ñ the small and medium - sized family businesses

in M exico (SMEs). The results indicate significant relationships between size ñ oy debt, based

on a series of internal factors involving character í individual sticas of due ñ os - directors, age

of the director, his experience, his financial expectations, aversion or n to risk and attitude

Control to ace í as between capital and retained earnings. However, there are also é n elements

outside the company and the entrepreneur / due ñ or that directly affect their funding

decisions; some of them are macro - or - economic factors, product and financial mechanisms,

the social, technological or logical and cultural, legal and fiscal environment, and the

international environment.

Pozzo (2005) analyzes the determinants of the capital structure of companies in

Latinoam merica using information or quarterly accounting n non - financial or company as

with quotation or n in the markets for 1993- 2004 per í odo ... the results econometric estimates

show that the determination of the capital structure of non - s signatures orit depends on the

character í particular sticas of the same, but the level of volatility macro- or mica, size ñ oy

level of development local financial markets and institutional quality of the

country ountries have a significant influence on the decision or n finance companies, which

have a tendency to decide its capital structure the way predicted by theory  IA to í to the

hierarchy of sources of financing, which postulates that, given the existence

of information asymmetry í as the source of resources m to s cheaper for firms are equity,

which represent the main element for corporate financing.

Within the national background the following is highlighted:

Mendoza Barrezueta (2012) analyzes the speed with which Peruvian companies

converge toward the optimal ratio or debt for the period 2005 to 2011. Finding that Peruvian

companies listed on the Lima Stock Exchange are adjusted to an optimal or borrowing at a rate

of 28 percent and 38 percent in the long and short term, respectively.  The results support the

theory í to balance capital structure provides an appropriate framework for evaluating the

capital structure of Peruvian companies.These control variables, tangibility and growth

opportunities have high explanatory power as proxies for the theory í to the hierarchy ay for

long - term debt, while the behavior of tangibility and profitability inconclusive to

define í to any theory of capital structure relative to borrowing short and long

term, in addition to s the size ñ or is not significant for ning u n type of debt. Finally, we have

only found differences in the level of indebtedness between the services sector and agrarian

compared to other sectors for short-term debt. They conclude that Peruvian companies use their

internally generated funds to finance their short and long term investments. This is mainly

because it has been used to large publicly traded companies that are solvent and in its

composition or n of the capital structure is more dominant to s equity than debt.Finally this

research or n analyzes the impact of differences between sectors of the economy  í to

Peru. Showing that the short - term services and agriculture have different behavior on the level

of debt, but in the long run, this behavior is corrected and all sectors of the

economy ú í to an act similarly.

It rescues the character í sticas and current conditions of the economy í to make it very

dif í easy permanence of businesses small ñ as they remain alone, without contact with other

companies (whether m to s larger or the same size ñ o), with support institutions, universities,

technological centers or logical, etc. Therefore promotional strategy or n must end the

traditional isolation of SMEs. For this purpose measures and instruments spec í tists ranging

from dinamizaci or n to exit markets its products tothe consolidation or n markets services

necessary to meet the conditions of market competitiveness are required where ON or to .

G or mez Jacinto (2014) determin or the factors that explain the capital structure in

non - financial companies listed on the Lima Stock Exchange. Seven explanatory variables such

as profitability, collateral value of assets, tax PROTECTING n different debt, growth,

size lis, risk and liquidity were studied. The results show that the size ñ or, the collateral value

of assets and liquidity are the factors that explain the structure of capital companies Per u. These

results lead to mixed results on that theoryholds í to the capital structure in these

companies. The size ñ or company is explained by the theory to the trade -off í while the

collateral value of assets and liquidity are explained under the focus of the theory to

the pecking í order.

Finally, we highlight the following local background:

Chic what you Quispe and Tello Rodr í guez (2015), identified the companies within

the food and beverage sector in Cajamarca who have information or financial n to determine the

financing structure, which affects the collection or n data with in order to obtain results using

models QUEUEANDSTATISTICSMAN appliances such as the VERIFYING or n data and

finally we can get to identify the relationship or existing n between the capital structure and

behavior strat e cal companies in the food sector and drinks in terms of their investment

policies pol í or n. Reaching the conclusion or n that for satisfactory model must have a greater

n umber of observations, ie, a greater number of firms in the food sector and beverage

Cajamarca.

The determinants of the choice of capital structure

In this section, we present a brief discussion of the attributes that different theories of the capital

structure suggest may affect the choice of debt by stock of the company.  These attributes are the

structure of assets denoted, fiscal shields do not generate debt, growth, uniqueness, industry

classification, size, earnings volatility, and profitability. The attributes, their relation to the

optimal capital structure choice and their observable indicators are discussed below.

A. RRANTY value as assets

Most capital structure theories argue that the type of assets owned by a company in some way

affects its capital structure choice. It suggests that, by selling secured debt, companies increase

the value of their equity by expropriating the wealth of their existing unsecured creditors.

The arguments put forward by Myers (1984), suggest that companies can find advantages to sell

secured debt. Their model shows that there may be costs associated with issuing securities on

which company executives have better information than overseas shareholders. Issuance of debt

secured by assets with known securities avoids these costs. For this reason, companies with

assets that can be used as collateral can be expected to issue more debt to take advantage of this

opportunity. It also suggests that the shareholders of leveraged companies have an incentive to

invest their optimum to expropriate the wealth of the bondholders of the firm.  This can

incentive also induce a positive relationship between debt ratios and the ability of companies to

back up their debt. If the debt can be secured, the borrower is restricted from using the funds for

a particular project. Since such collateral can be used for projects that can not be counted on

collateral, creditors may demand more favorable terms, which in turn may cause these

companies to use equity rather than debt financing.

B. Debt as fiscal shield.

Masulis (1980) present an optimal capital structure model that incorporates the impact of

corporate taxes, personal taxes, and non-debt related corporate tax savings. They argue that

tax deductions for depreciation and investment tax credits are substitutes for the tax benefits of

debt financing. As a result, companies with large taxes do not protect the debt in relation to

their expected cash flow include less debt in their capital structures.

C. Agency costs

As mentioned earlier, controlled capital firms have a tendency to invest their optimum to

expropriate the wealth of the bondholders of the firm. The cost associated with this agency

relationship is likely to be greater for growing business industries, which have greater

flexibility in choosing future investments. The expected future growth should therefore be

negatively related to long-term debt levels. Brealy and Myers (1993) point out that this agency

problem is mitigated if firm short-term problems rather than long-term debt. This suggests that

short-term debt ratios could actually be a positive relationship with growth rates if growing

companies substitute short-term financing for long-term financing.

D. Singularity

Titman (2005) presents a model in which the decision to liquidate a company is causally

linked to its bankruptcy. As a result, the costs that companies can potentially impose on their

customers, suppliers and workers through settlement is relevant to their capital structure

decisions. Clients, workers and suppliers of single-product or specialized products are likely

to suffer relatively high costs in the event of liquidation. Your workers and suppliers probably

have specific skills and capital objectives, and your customers may have difficulty finding

alternative service for their relatively unique products. For these reasons, it is expected that

the uniqueness of being a negative relationship with debt ratios.

E. Or n Industrial Classification

Titman (2005) also suggests that companies that manufacture products that require the

availability maintenance and specialized liquidation spares will find it especially costly.This

indicates that machinery and manufacturing equipment companies will be financed with

relatively less debt. To measure this, we include a dummy variable equal to one for companies

with SIC codes between 3400 and 4000 (the companies producing machines and equipment)

and zero in another case that affects an independent attribute debt ratios.

F. The profitability

Brealy and Myers (1993) suggests that firms prefer capital increase, first to cumulative results,

second to debt, and third of the issuance of new shares. He suggests that this behavior may be

due to the costs of issuing new shares. These may be the costs discussed in which they arise

due to asymmetric information, or they may be transaction costs.In any case, the past

profitability of a company, and therefore the amount of disposable income to be withheld,

must be an important determinant of its current capital structure.We use the proportions of

operating income over sales (OI / S) and operating income over total assets (OIITA) as

indicators of profitability (SHERIDAN & WESSELS, 1988)

Modern literature on capital structure began in 1958 with Franco Modigliani and Merton

Miller (M & M) and their strong assumptions about the perfect market. After M & M, other

important theories emerge, such as tradeoff and pecking order. (Rangel Barbosa, 2011).

Optimal Capital Structure

Every real investment opportunity is accompanied by financing decisions; These in turn

determine the composition of capital between debt and equity.

Two modern theoretical approaches attempt to explain this composition of capital, and hence to

the financial structure: on the one hand, the theory of the equilibrium of the capital structure or

the theory of static (trade-off theory) which considers the capital structure Of the company as

the result of the balance between the benefits and costs derived from the debt, keeping constant

the assets and the investment plans. On the other hand, the Theory of the Financial Hierarchy

(Pecking Order Theory) exposes the company's preference for internal and external financing,

and debt to equity using stock issuance (Myers, 1984)

Theorem of Modigliani and Miller.

These authors were the first to develop a theoretical analysis of the financial structure of

companies whose central objective is to study their effects on the value of the same.

The traditional theory proposes that the optimal financial structure will be one that

maximizes the market value of the company and minimizes the cost of capital.

This structure of not being appropriate can represent a restriction to the decisions of investment

and therefore, to the growth of the company.

Income, variable costs, fixed costs, depreciation, financial interests, taxes, debt costs, capital

costs are used. All these interrelated variables allow us to define the financial profitability of the

organization.

M & M explain that the value of the company will only depend on the income generating

capacity of its assets regardless of where the financial resources that have financed them have

come from; That is, both the total market value of a company and its cost of capital are

independent of its financial structure, therefore, the company's borrowing policy has no effect

on shareholders (Brealy & Myers, 1993)

M & M say the expected return of the common shares of a company grows equally

indebted to its level of indebtedness; that is, the likely returns that shareholders expect from the

shares of a company that belongs to a particular class, or linear function of

n or n raz debt (Brealy & Myers, 1993)

M & M found that the rate of return of an investment project or n must be completely

independent of how the company is financed, and must at least be equal to the rate of

capitalization or n the market applies to companies without leverage and Which belongs to the

same kind of risk as the investment company; ie the rate of return required in the

assessment or investment n is independent of the way in which each company

is funded é (Fern ndez to 2003).

Static Balance Theory (TRADE-OFF)

When faced with a problem, there is usually a conflict between objectives or qualities versus

costs or defects; That is why in a decision-making process it is necessary to have a holistic view

of the fact, in order to consider all the elements that involve the decision (Soto Ibáñez)

This theory suggests that the optimal financial structure of firms is determined by the interaction

of competitive forces that press on financing decisions. These forces are the tax advantages of

debt financing and bankruptcy costs.

On the one hand, since interest paid on debt is generally deductible from the tax base of

corporate income tax, the optimal solution would be to contract the maximum possible

debt. However, on the other hand, the more the company is in debt, the more likely it is to face

financial problems, the most serious of which is bankruptcy.

It is important to mention that the theory of the trade-off does not have a specific author, since

this theory groups to all those theories or models that sustain that there is a mixture of optimal

debt-capital, that maximizes the value of the company, that occurs Once the benefits and costs

of debt are balanced.

The theory of the trade-off can not explain why companies with high financial returns within the

same sector choose to finance themselves and do not use their debt capacity, or why in countries

where taxes have been reduced or Tax rate for debt companies opt for high

indebtedness. Therefore, there is not yet a model that can determine the optimum indebtedness

for the company and thus improve the financial profitability from the perspective of the

financial structure.

The Theory of Financial Hierarchy (PECKING ORDER THEORY)

The theory of hierarchical capital structure is among the most influential when it comes to

explaining the financing decision regarding corporate leverage. This theory rests on the

existence of asymmetric information (with respect to investment opportunities and assets

currently held) between firms and capital markets. That is, the directors of the organization

often have better information about the state of the company than the external investors.

The Pecking Order financing theory states that there is an order of choice for funding

sources. What determines the financial structure of the companies is the intention to finance

new investments, first internally with own funds, then with low exposure debt such as banking,

then with public debt in the case that offers lower its valuation than Actions and lastly with new

actions.

To summarize the operation of Theory of the Financial Hierarchy, Myers (1984), formulates

four statements that support it:

The pre ferred the financing companies or internal n.

The estimated rate of dividend distribution adapts to investment opportunities or n.

Although the pol í tica dividend is fixed, fluctuations in profitability and investment

opportunities or n are unpredictable, which the cash flows generated internally can be higher or

lower capital expenditures.

If you require external financing or n, the company issues first titles m t t s insurance.

Our main objective is Identify the determinants of capital structure of companies in the food and

beverage industry of the Lima Stock Exchange for the years 2012 to 2015.

II. M É ALL

It has been decided to use the design type of our research is non-experimental, to identify

correlations and determinants since it is done without deliberately manipulating variables and it

is about observing phenomena as they occur in their natural context, and then analyze them.  The

database used is a cross-sectional series that collects financial information from 18 companies

listed on the Lima Stock Exchange.

It was used as a unit of study to active Peruvian companies, where our population is only based

on the Peruvian business sector, arriving at a sample of 18 active Peruvian companies, whose

balance sheets are in the Super Intendance of Market and Securities, since 2012, By 2015.

Table 1: Companies studied.

BUSINESSAGRICOLA CERRO PRIETO SAAGROINDUSTRIAS SAN JACINTO SAAAGROINDUSTRIAL LAREDO SAAAGR Icola AND LIVESTOCK Chavin SAALICORP SAAAUSTRAL GROUP SAAAbout us

GLORIA SALAIVE SACARTAVIO SOCIEDAD ANONIMA ABIERTA (CARTAVIO SAA)CASA GRANDE SOCIEDAD ANONIMA ABIERTA (CASA GRANDE SAA)CENTRAL AZUCARERA CHUCARAPI PAMPA BLANCA SACOMPANY AGROINDUSTRIAL POMALCA SAACAYALTI SAA AGROINDUSTRIAL COMPANYCOMPANY AZUCARERA "EL INGENIO" SAFISHING EXALMAR SAAUNION OF PERUVIAN BREWERIES BACKUS AND JOHNSTON SAAAGROINDUSTRIAS AIB SA

Source: Prepared

The independent variable is the capital structure of 18 Peruvian companies that are listed in the

Food and Beverage index of the Lima Stock Exchange. The dependent variable is the debt ratio

of the firm, with respect to which the degree of determination of a set of financial variables is

identified:

Table 2: Variable Considered.

Cost of Debt:

It measures financial expenses

between debt.

Marginal tax rate (TASIMAR):

Measures the income tax between

the Profit Before Taxes and shares.

Liquidity measured by the Cash

Flow on the Value of the Firm

(UAI):

Measure the cash between the Value

of the Firm.

Business Life Time (TVIEM):

A Actual measures not among Year

of constitution.

Annual Dividend Rate (TAD):

Measures Dividends distributed

among the shareholders' equity.

Tama not of the measure Annual

Net Sales (TEVNA) Company: Measured by annual sales.

Source: Prepared

To collect data we obtain basic information of Peruvian companies through public pages as the

Lima Stock Exchange, the Superintendency of Securities Market. We use a table in the Excel

program to systematize and organize data, relevant statistical processes following models based

on ordinary least squares based on elasticities between variables.

We use the following equations, with which we can test our hypothesis:

RE = f (C, LIQCORR, TAD, TVIEM ^ 2, INA) (1)

In which, RE, debt ratio is based on C, which becomes the elasticity of debt heritage

LIQCORR, which is the current liquidity, TAD, annual dividend rate, TVIEM ^ 2, lifetime

businesses, and INA, adjusted net investment.

Ln (RE) = α + β. Ln (C) + Ln (LIQCORR) + Ln (TAD) + Ln (TVIEM ^ 2) + Ln

(INA) (2)

III. RESULTS

At the individual level the relationship between different variables is as follows:

The elasticity of the capital structure compared to current liquidity ratio is -0.38, still

significant this relationship or n to 1%, with a degree of determination or n of 11.0% (Table 3)

The elasticity of the capital structure from the annual dividend rate is 0.55, with

significant this relationship or n to 1%, with a degree of determination or n 23.3%

(Table 4.)

The elasticity of the capital structure regarding the lifetime of the company is 0.25, not

being significant (Table 5)

The elasticity of the capital structure with respect to the investment or net adjusted n is

0.29, with significant this relationship or n to 1%, with a degree of determination orn 15.9%

(Table 6)

The elasticity of the capital structure regarding the cost of debt is -0.15, although the

sign is correct, this variable is not significant (Table 7)

The elasticity of the capital structure regarding the marginal tax rate is 0.003, although

the sign is correct, it is not significant (Table 8)

Table 3: Elasticity of Endeudameinto Heritage regarding Current Liquidity Ratio

Table 4:

Elasticity Endeudameinto Heritage regarding the Annual Dividend Rate

Table 5: Elasticity Heritage Endeudameinto respect to Time Life Company

Table 6: Elasticity Heritage Endeudameinto regarding Adjusted Net Investment Company

Table 7: Elasticity Endeudameinto Heritage regarding the cost of debt Company

Table 8: Elasticity Heritage Endeudameinto regarding Marginal Tax Rate

Specification change

From individual regressions of the optimal capital structure determinants identified, it is

considered a change in the model specification testing, by the following:

Ln (RE) = α + β. Ln (C) + Ln (LIQCORR) + Ln (TAD) + Ln (TVIEM ^ 2) + Ln

(INA) (3)

From the above highlights the following:

Elasticities of the capital structure of companies in the food and beverage industry are: -

0.22 respect to the current liquidity ratio, 0.52 regarding the annual dividend rate, compared to -

0.14 square lifetime of the company and 0.33 respect to the investment or n net adjusted

signature. In all cases significant 10% or less.

The model, with the change of specification or n introduced, has a significance level of

1%, as measured by the probability cadastre í stico F Fisher.

The degree of determination or n the set of variables explains at least 42.9% of changes

in the capital structure of companies in the food and beverage industry.

Table 9: Elasticity Heritage Endeudameinto about their Determinants

IV. CONCLUSIONS

It has been found sufficient to say that the capital structure of the industry companies Food and

Drinks Lima Stock Exchange is based on evidence: (1) the ratio of current liquidity, there is a

negative correlation, ie a higher degree of liquidity, lower debt ratio of equity;  (2) the annual

dividend rate of the company, where the higher dividend rate, the higher level of indebtedness

of heritage; (3) the square of the lifetime of the company, which to a certain level of sales the

relationship is negative (less access to debt), then after a certain scale, longer life greater the

degree of indebtedness; and (4) the adjusted net investment in a positive, which implies that

more investment increased indebtedness ratio of heritage experience.

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