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प्रश्न
When the proportion of debt and equity is such that it results in an increase in the value of equity share the ______ is/are said to be optimal.
विकल्प
working capital
fixed capital
capital structure
Both (a) and (b)
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उत्तर
When the proportion of debt and equity is such that it results in an increase in the value of equity share the capital structure is/are said to be optimal.
Explanation:
The ratio of debt to equity increases the value of equity shares when a company has an ideal capital structure.
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संबंधित प्रश्न
Viyo Ltd.' is a company manufacturing textiles. It has a share capital of Rs 60 lakhs. The earnings per share in the previous year was Rs 0.50. For diversification, the company requires additional capital of Rs 40 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year the company earned profit of Rs 8 lakhs on capital employed. It paid tax @ 40%.
a. State whether the shareholders gained or lost, in respect of earning per share on diversification. Show you calculations clearly.
b. Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.
What is meant by Trading on Equity?
Veronica Ltd., a reputed truck manufacturing company, needs rupees twenty crores as additional capital to expand its business. Mr Alind Jindal, the CEO of the company, wants to raise funds through equity. The Finance Manager, Mr Nikhil Sachdeva, suggests that the existing shareholders be offered the privilege to subscribe to the new issue of shares as per the terms and conditions of the company which was agreed by Mr Alind Jindal.
Name the method through which the company decided to raise additional capital.
Explain the following as factor affecting the choice of capital structure:
Cash flow position
Explain the following as factor affecting the choice of capital structure:
Floatation costs
Explain the following as factors affecting the choice of capital structure:
Control
Write the external factors influencing capital structure.
Write notes on Capital structure and its components.
What is meant by capital structure?
Write the internal factors influencing Capital Structure.
Owned Capital Borrowed Capital
Financial leverage is called favourable if :
______ refers to a situation when a company is not able to meet its fixed financial charges.
ICR = ______
Tapan, after leaving his job, wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing of Mobile-phones with some unique features. However, Tapan felt that the mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. ______ factor affecting fixed capital requirements is making Tapan choose furniture business over mobile phone.
Assertion (1): Higher the flotation cost, less attractive the source.
Reason (R): The choice between the payment of dividend and retaining the earnings is, to some extent, affected by the difference in the tax treatment of dividends and capital gains.
State any four factors affecting the decision that determines the overall capital and the financial risk of the enterprise.
Krish limited is in the business of manufacturing and exporting carpets and other home decor products. It has a share capital of ₹ 70 lacs at the face value of ₹ 100 each. Company is considering a major expansion of its production facilities and wants to raise ₹ 50 lacs. The finance manager of the company Mr. Prabhakar has recommended that the company can raise funds of the same amount by issuing 7% debentures. Given that earning per share of the company after expansion is ₹ 35 and tax rate is 30%, did Mr. Prabhakar give a justified recommendation?
Show the working.
State any three factors determining the choice of an appropriate capital structure of a company.
