As Pfizer considered changing its business mix, the $67.8 billion pharmaceutical maker wanted to get a better handle on the best capital structure for the company. So treasury built a dynamic model that takes into account Pfizer's balance sheet and cash flow forecasts to determine an appropriate capital structure.

Amit Singh, Pfizer's senior director of capital markets, says standard models for a company's capital structure focus mostly on tax benefits related to leverage and distress costs. The traditional analysis usually ends up suggesting the amount of leverage equal to a Triple-B credit rating is appropriate, he says.

Pfizer wanted to take into account many other factors, including cash on the balance sheet and its possible uses, the location of that cash and any challenges in repatriating it, changes in global taxes and payouts to shareholders.

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